Author Topic: Inequality: the long view  (Read 13028 times)

EscapeVelocity2020

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Re: Inequality: the long view
« Reply #50 on: June 27, 2017, 09:48:13 AM »
Also, most people have no clue what the wealth distribution really looks like in the the US.

Here's a good 6 minute YouTube primer graphically showing what 'ideal', perceived, and actual wealth distribution in the US looks like.  Pretty shocking.

Politicians thrive on keeping the 99% uninformed, bickering, and emotional.  And now there's this new invention of slapping the label 'fake news' on inconvenient truths.  But the fact people perceive (or decieve themselves) like the US has some healthy middle class '1950s' wealth distribution goes to show that people are not informed or just can't conceive of what the concentration of the top 1% wealth looks like.
« Last Edit: June 27, 2017, 09:51:44 AM by EscapeVelocity2020 »
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RetiredAt63

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Re: Inequality: the long view
« Reply #51 on: June 27, 2017, 09:50:53 AM »
People aren't going to have equal outcomes. They also aren't going to have equal opportunities. Trying to change this a fool's errand.

Society can make spending choices that encourage equal opportunities. 

Low/no tuition fees for post-secondary education mean more students can continue their educations. 
Universal health care means people are not tied to their jobs because they fear losing work-related health insurance.
Good parental leaves mean women and men have more options for work/family life.

And so on.  These are all social choices.
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Dabnasty

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Re: Inequality: the long view
« Reply #52 on: June 27, 2017, 09:55:40 AM »
I also don't get how some can be OK with the concept of FIRE, but have concerns about inequality at some arbitrarily chosen 'extreme' wealth level.  For example, if one has $1M, they are pointing the finger at those that have 10M or 50M as being part of the problem.  In reality if inequality is such a huge problem, we'll never solve it by simply taking money from the ultra rich.  It will have to come all the way down to include many members of this board who are working towards FI. 
I don't think extreme wealth is arbitrary.

The concept of FIRE is to make just enough to live the life you want and then retire. Many on these forums advocate giving back anything above that number. We haven't really put a number on "extreme wealth" in this thread but most of the debate is whether or not any number is high enough that it should be taxed at a steeply progressive rate. When I think of extreme wealth I'm thinking of numbers many multiples of what a family could live off of without touching the principle.

I would also argue that as an individual you should start giving away your wealth well before you reach that point, but that's another debate.
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A Definite Beta Guy

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Re: Inequality: the long view
« Reply #53 on: June 27, 2017, 10:13:19 AM »
People aren't going to have equal outcomes. They also aren't going to have equal opportunities. Trying to change this a fool's errand.

Society can make spending choices that encourage equal opportunities. 

Low/no tuition fees for post-secondary education mean more students can continue their educations. 
Universal health care means people are not tied to their jobs because they fear losing work-related health insurance.
Good parental leaves mean women and men have more options for work/family life.

And so on.  These are all social choices.
None of those create equal opportunity. Just to go with the third, since it's extremely obvious, some families have 2 parents, and some families do not. You cannot adjust for that, unless you decided to off my Dad somehow. Perhaps through a war or a bubonic plague, which is what the original article suggests is the ONLY way to create equality.

I don't care if the average person goes to college, they still aren't going to have the opportunities of wealthy kids unless you prevent their parents from helping them in other ways (connections, job advice, additional rent money, whatever).

EDIT: If you want to spend money on it, fine, but I'm not interested wasting money on an equality dream. Expanding coverage to the remaining 20 million uninsured is probably going to cost another $200 billion per year. Trying to correct for the fact that everyone has crappy plans with high deductibles is going to cost several hundred billion more. Bernie Sanders free college is $75 billion. If you want to increase all the education spending in the US to $18,000 per pupil, that's another $300+ billion.

Now you're talking another $1.2 trillion in spending, which is a 36% increase in taxes, and we're still not going to be equal, so someone is going to come back in 10 years and want even more. I haven't even touched retirement, or pre-K programs, for instance.
« Last Edit: June 27, 2017, 10:23:49 AM by A Definite Beta Guy »

Dabnasty

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Re: Inequality: the long view
« Reply #54 on: June 27, 2017, 10:23:09 AM »
Does anyone have opinions on very high taxation of luxury items?

Defining luxury would certainly be difficult, but personally I would be ok with anything that is a non-necessity. Which will still be difficult to define. Food is a necessity, but what about steak. Transportation is a necessity, but Escalades are not. Homes...where to begin.

Maybe we could apply the high tax rate to all purchases and then give exemptions rather than looking at it the other way around? Then product lobbyists would fight for that exemption. Lots of room for corruption. Tax luxury product manufacturers directly?

Just some thoughts, feel free to butcher them.
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bender

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Re: Inequality: the long view
« Reply #55 on: June 27, 2017, 10:23:20 AM »
I disagree that the tax system in setup to favor the rich in this country.


Source http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/

Your graph leaves out effective tax rate by income level because it's not quite as convincing?

Your comment is not adding to the conversation, please provide the data if I missed something.  Here's what I found so far (2012 data).  Here's a few select quotes:

Quote
The data demonstrates that the U.S. individual income tax continues to be very progressive, borne mainly by the highest income earners.
The top 1 percent of taxpayers earned their largest share of income since 2007 at 21.9 percent of total AGI and paid their largest share of the income tax burden since the same year at 38.1 percent of total income taxes.
In 2012, the top 50 percent of all taxpayers (68 million filers) paid 97.2 percent of all income taxes while the bottom 50 percent paid the remaining 2.8 percent.
The top 1 percent (1.3 million filers) paid a greater share of income taxes (38.1 percent) than the bottom 90 percent (122.4 million filers) combined (29.8 percent).
The top 1 percent of taxpayers paid a higher effective income tax rate than any other group at 22.8 percent, which is nearly 7 times higher than taxpayers in the bottom 50 percent (3.28 percent).

source:  https://taxfoundation.org/summary-latest-federal-income-tax-data-0/




bender

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Re: Inequality: the long view
« Reply #56 on: June 27, 2017, 10:31:39 AM »
Does anyone have opinions on very high taxation of luxury items?

Defining luxury would certainly be difficult, but personally I would be ok with anything that is a non-necessity. Which will still be difficult to define. Food is a necessity, but what about steak. Transportation is a necessity, but Escalades are not. Homes...where to begin.

Maybe we could apply the high tax rate to all purchases and then give exemptions rather than looking at it the other way around? Then product lobbyists would fight for that exemption. Lots of room for corruption. Tax luxury product manufacturers directly?

Just some thoughts, feel free to butcher them.

I think you're talking about a progressive consumption tax.  Seems to work great for people who save and live below their means if a consumption tax were to replace the current income tax system.  Although those who are already FIRE may disagree...

https://www.cato.org/publications/cato-online-forum/move-progressive-consumption-tax

Accountant007

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Re: Inequality: the long view
« Reply #57 on: June 27, 2017, 10:31:46 AM »
Also, most people have no clue what the wealth distribution really looks like in the the US.

Here's a good 6 minute YouTube primer graphically showing what 'ideal', perceived, and actual wealth distribution in the US looks like.  Pretty shocking.

Politicians thrive on keeping the 99% uninformed, bickering, and emotional.  And now there's this new invention of slapping the label 'fake news' on inconvenient truths.  But the fact people perceive (or decieve themselves) like the US has some healthy middle class '1950s' wealth distribution goes to show that people are not informed or just can't conceive of what the concentration of the top 1% wealth looks like.

If you look at the top 1% of global wealth, you are looking at someone with a net worth of around 775K (includes home equity).  That would include a sizeable number of us in this forum.  Top 1% of wage earners globally earn in the neighborhood of 32K.  I would guess that would be a good many of us here.  So if the people at the top 1% are a problem, then we all better take a good look in the mirror, instead of pointing to people even higher up the wealth ladder (extreme wealth, as we like to call it).  Just carving out our wealthy nation to determine who is the top 1% doesn't show the full picture.

bender

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Re: Inequality: the long view
« Reply #58 on: June 27, 2017, 10:37:32 AM »
Income Inequity is a problem to me mostly because US politicians are easily influenced by campaign contributers and lobbyists. Policy is being passed to benefit the elite class and widen the margin of inequality. At this point I'm not sure you can even argue against this.  The conditions being put in place have made it harder for people to achieve upward mobility imo.

Can you be more specific about the conditions that make it harder to achieve upward mobility?  I thought education was the major enabler of upward mobility. 

What policies are being passed to benefit the elite class and widen inequality?


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Re: Inequality: the long view
« Reply #59 on: June 27, 2017, 10:42:59 AM »
I disagree that the tax system in setup to favor the rich in this country.


Source http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/

It is more about effective tax rate. The top 20% of Americans control 85% of the money. A rational person would assume they pay 85% of the taxes. The tax code favors those who are living off of capital gains and dividends. The CEO who makes 200k/yr with $3M in stock options, a person making 5x the median income off dividends, and real estate developers. W2 wage earners are all getting the short end of the stick, even those who make a ton of money. A surgeon or law firm partner who is making 600k is paying ~50% of it in taxes; the CEO from earlier is paying ~20%.   

It is cheaper for the Koch's of the world to give 1% of their wealth (tax deductible) to political campaigns that make sure they stay in a 20% tax bracket than to see their tax rate go to 25%.   

This quote doesn't make much sense - please provide some reasoning behind it.  Many are passionate about this subject, but I'm finding that some statements are not backed up by facts.

This is just common sense. If I have $10B, which is $400M/yr without touching the principal, it makes more sense for me to donate a tax deductible portion of that to make sure politicians who favor your current situation (i.e. conservative <-- don't want change or only slow change by definition) are elected to office.

The average Senate campaign costs 10M. There are 33 senators being elected in 2018. All winning senators will spend ~300-350M combined in 2018. The combined wealth of the top 0.01% (families with 20M+ in assets) in the US is 9T. 0.008% of their wealth could fund the entire 2018 senate election (winners and losers).   

That is for a national senate race. When you look on the local level at city councils, mayors, state senate etc. it gets even crazier. How much do you think a few real estate guys have to donate to a city council race in Atlanta Georgia to sway an election their way?   

TimmyTightWad

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Re: Inequality: the long view
« Reply #60 on: June 27, 2017, 10:56:30 AM »


Can you be more specific about the conditions that make it harder to achieve upward mobility?  I thought education was the major enabler of upward mobility. 

What policies are being passed to benefit the elite class and widen inequality?


Google education cuts.
My state , PA, has had hundreds of millions in cuts to education just in the last 5 yrs

bender

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Re: Inequality: the long view
« Reply #61 on: June 27, 2017, 10:59:16 AM »
Can you be more specific about the conditions that make it harder to achieve upward mobility?  I thought education was the major enabler of upward mobility. 
What policies are being passed to benefit the elite class and widen inequality?
Google education cuts.
My state , PA, has had hundreds of millions in cuts to education just in the last 5 yrs

Good example - That's unfortunate.  I think public education is failing in many ways and needs to be fixed.  Not sure how it can be done it's such a huge issue.

sokoloff

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Re: Inequality: the long view
« Reply #62 on: June 27, 2017, 11:14:23 AM »
I disagree that the tax system in setup to favor the rich in this country.


Source http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/

It is more about effective tax rate. The top 20% of Americans control 85% of the money. A rational person would assume they pay 85% of the taxes. The tax code favors those who are living off of capital gains and dividends.
Looking at the chart, a rational person would conclude that their instincts were roughly correct. That the top 20% of people (assuming returns filed is a close approximation for people; if anything it's biased in a way that "helps" this argument) who, per your figure, control 85% of the wealth, are paying pretty close to 85% of the taxes.

The top 16% of returns above account for 79.4% of the taxes paid. If you break the next section proportionally, take 18.4% of the next bucket, representing 4% of the returns and 2.75% of the taxes paid. That gives you a 20% of returns and a conservative 82.1% of income (edit: tax paid).
« Last Edit: June 27, 2017, 11:58:13 AM by sokoloff »

Jrr85

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Re: Inequality: the long view
« Reply #63 on: June 27, 2017, 11:46:40 AM »
Does anyone have opinions on very high taxation of luxury items?

Defining luxury would certainly be difficult, but personally I would be ok with anything that is a non-necessity. Which will still be difficult to define. Food is a necessity, but what about steak. Transportation is a necessity, but Escalades are not. Homes...where to begin.

Maybe we could apply the high tax rate to all purchases and then give exemptions rather than looking at it the other way around? Then product lobbyists would fight for that exemption. Lots of room for corruption. Tax luxury product manufacturers directly?

Just some thoughts, feel free to butcher them.

The U.S. already tried this.  They put something like a 10% tax on luxury boats (can't remember how they defined 'luxury'), so of course the purchase of luxury boats dropped off a cliff, and there were tons of layoffs of bluecollar workers. 

Alim Nassor

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Re: Inequality: the long view
« Reply #64 on: June 27, 2017, 11:54:35 AM »
I disagree that the tax system in setup to favor the rich in this country.


Source http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/

It is more about effective tax rate. The top 20% of Americans control 85% of the money. A rational person would assume they pay 85% of the taxes. The tax code favors those who are living off of capital gains and dividends.
Looking at the chart, a rational person would conclude that their instincts were roughly correct. That the top 20% of people (assuming returns filed is a close approximation for people; if anything it's biased in a way that "helps" this argument) who, per your figure, control 85% of the wealth, are paying pretty close to 85% of the taxes.

The top 16% of returns above account for 79.4% of the taxes paid. If you break the next section proportionally, take 18.4% of the next bucket, representing 4% of the returns and 2.75% of the taxes paid. That gives you a 20% of returns and a conservative 82.1% of income.


I was just about to post the same thing, then I saw your comment.

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Re: Inequality: the long view
« Reply #65 on: June 27, 2017, 12:37:35 PM »
I disagree that the tax system in setup to favor the rich in this country.


Source http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/

It is more about effective tax rate. The top 20% of Americans control 85% of the money. A rational person would assume they pay 85% of the taxes. The tax code favors those who are living off of capital gains and dividends.
Looking at the chart, a rational person would conclude that their instincts were roughly correct. That the top 20% of people (assuming returns filed is a close approximation for people; if anything it's biased in a way that "helps" this argument) who, per your figure, control 85% of the wealth, are paying pretty close to 85% of the taxes.

The top 16% of returns above account for 79.4% of the taxes paid. If you break the next section proportionally, take 18.4% of the next bucket, representing 4% of the returns and 2.75% of the taxes paid. That gives you a 20% of returns and a conservative 82.1% of income.

I should have expounded on the graphic. I stated the top 20% hold 85% of the wealth as support that maybe they should pay 85% of the taxes and the graph wasn't as lopsided as it appeared at first. The problem is federal income tax and most state income tax is the only progressive tax we have. Once you consider the regressive taxes: payroll, property, sales tax, and some state taxes you get a different perspective:


http://ctj.org/ctjreports/2014/04/who_pays_taxes_in_america_in_2014.php#.WVKjS8_ytOQ

In a progressive tax system you would expect the top earners to pay a much higher percentage of their total income than those at the bottom. In reality, the US is closer to a 30% flat tax across the board.


MrMoogle

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Re: Inequality: the long view
« Reply #66 on: June 27, 2017, 12:41:43 PM »
While I don't think inequality is ideal, I haven't seen a way for government to improve it without causing worse consequences.  Some inequality is going to be a fact of life.  For me, it's more important that the poorest has an acceptable standard of living, which I think the US has.

jmecklenborg

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Re: Inequality: the long view
« Reply #67 on: June 27, 2017, 12:56:00 PM »
Federal income taxes are progressive and other specific features of the federal code like IRA's and HSA's, but other types of federal taxation are much lower than they have been historically.  The capital gains tax, for example, is a fraction of what it was 50 years ago.  This is a big reason why there is more stock market and real estate speculation than ever before and why once someone becomes wealthy, their wealth spirals upward.  An explicit stock and real estate transaction tax would help reduce reckless stock trading and real estate speculation. 

Meanwhile, state taxation schemes tend to be regressive.  The state sales taxes are obviously regressive, and some much more regressive than others.  For example, most states do not levy sales taxes on food, but some do.  For example, "low tax" Tennessee taxes groceries at 9.5~%, which is a tax on that state's poor that the poor elsewhere do not bear. 

Dabnasty

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Re: Inequality: the long view
« Reply #68 on: June 27, 2017, 12:56:56 PM »
Also, most people have no clue what the wealth distribution really looks like in the the US.

Here's a good 6 minute YouTube primer graphically showing what 'ideal', perceived, and actual wealth distribution in the US looks like.  Pretty shocking.

Politicians thrive on keeping the 99% uninformed, bickering, and emotional.  And now there's this new invention of slapping the label 'fake news' on inconvenient truths.  But the fact people perceive (or decieve themselves) like the US has some healthy middle class '1950s' wealth distribution goes to show that people are not informed or just can't conceive of what the concentration of the top 1% wealth looks like.

If you look at the top 1% of global wealth, you are looking at someone with a net worth of around 775K (includes home equity).  That would include a sizeable number of us in this forum.  Top 1% of wage earners globally earn in the neighborhood of 32K.  I would guess that would be a good many of us here.  So if the people at the top 1% are a problem, then we all better take a good look in the mirror, instead of pointing to people even higher up the wealth ladder (extreme wealth, as we like to call it).  Just carving out our wealthy nation to determine who is the top 1% doesn't show the full picture.
I don't think the percentile in which you fall is relevant, we only use the 1% figure to put things in perspective. Maybe we should include dollar amounts in this discussion as many of us seem to have different versions of "extreme wealth" but we're arguing like we're talking about the same thing. Personally I don't think living a comfortable life in the US off of the interest of your investments and not a whole lot more to spare qualifies for extreme wealth, not even close. The ability to buy multiple luxury homes, vehicles and the like-maybe. The ability to spend millions on campaign donations and actually see a return due to your candidates policies, that's probably extreme wealth.

Current estate tax is 40% on anything over $5.5 million/individual. Personally I think it could go a bit lower than 5.5 and also it should be progressive after that. Beyond that I could make up some numbers but I wouldn't be able to defend them. Maybe someone else can make some suggestions?
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EscapeVelocity2020

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Re: Inequality: the long view
« Reply #69 on: June 27, 2017, 01:13:48 PM »
Also, most people have no clue what the wealth distribution really looks like in the the US.

Here's a good 6 minute YouTube primer graphically showing what 'ideal', perceived, and actual wealth distribution in the US looks like.  Pretty shocking.

Politicians thrive on keeping the 99% uninformed, bickering, and emotional.  And now there's this new invention of slapping the label 'fake news' on inconvenient truths.  But the fact people perceive (or decieve themselves) like the US has some healthy middle class '1950s' wealth distribution goes to show that people are not informed or just can't conceive of what the concentration of the top 1% wealth looks like. 

If you look at the top 1% of global wealth, you are looking at someone with a net worth of around 775K (includes home equity).  That would include a sizeable number of us in this forum.  Top 1% of wage earners globally earn in the neighborhood of 32K.  I would guess that would be a good many of us here.  So if the people at the top 1% are a problem, then we all better take a good look in the mirror, instead of pointing to people even higher up the wealth ladder (extreme wealth, as we like to call it).  Just carving out our wealthy nation to determine who is the top 1% doesn't show the full picture.

I'm not sure why you argue for comparing an American's wealth to say that of a citizen of a 3rd world country (or the rest of the globe), this is completely irrelevant.  Yes, there is a lot of global inequality between rich and poor nations, but that is well beyond the scope of the problems we are discussing (which is inequality within a single developed economy (assumed by me to be the US)).  Maybe you can start another thread if you want to debate inequality between countries or in emerging countries or whatever.

I'm not saying that it's not an interesting point, just that it is a strawman when used to defend the inequality within the US.
« Last Edit: June 27, 2017, 01:19:21 PM by EscapeVelocity2020 »
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bender

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Re: Inequality: the long view
« Reply #70 on: June 27, 2017, 01:23:01 PM »
I should have expounded on the graphic. I stated the top 20% hold 85% of the wealth as support that maybe they should pay 85% of the taxes and the graph wasn't as lopsided as it appeared at first. The problem is federal income tax and most state income tax is the only progressive tax we have. Once you consider the regressive taxes: payroll, property, sales tax, and some state taxes you get a different perspective:


http://ctj.org/ctjreports/2014/04/who_pays_taxes_in_america_in_2014.php#.WVKjS8_ytOQ

In a progressive tax system you would expect the top earners to pay a much higher percentage of their total income than those at the bottom. In reality, the US is closer to a 30% flat tax across the board.

I think ctj.org is a partisan organization (they are a progressive lobbying group).  I think the information presented may be skewed to help push for the changes they are lobbying for. 

CBPP is non-partisan - This is a pretty good article with their take on tax rates for low income:
http://www.cbpp.org/research/policymakers-often-overstate-marginal-tax-rates-for-lower-income-workers-and-gloss-over-0

The lowest income group often has negative federal tax rates, which is ignored by the ctj article.  The ctj image shows the average income of $14k for the lowest 20%.  At this income level, families are eligible for numerous assistance programs that would more than negate anything paid in taxes.  Some examples include EITC, SNAP, Savers Credit, ACA (Obmacare)/Medicaid/CHIP and CTC (child tax credit).

Payroll taxes on $14k is about $850, which isn't much compared to the benefits listed above.  State and local taxes may also be reduced depending on the location. 

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Re: Inequality: the long view
« Reply #71 on: June 27, 2017, 02:15:47 PM »

I think ctj.org is a partisan organization (they are a progressive lobbying group).  I think the information presented may be skewed to help push for the changes they are lobbying for. 

CBPP is non-partisan - This is a pretty good article with their take on tax rates for low income:
http://www.cbpp.org/research/policymakers-often-overstate-marginal-tax-rates-for-lower-income-workers-and-gloss-over-0

The lowest income group often has negative federal tax rates, which is ignored by the ctj article.  The ctj image shows the average income of $14k for the lowest 20%.  At this income level, families are eligible for numerous assistance programs that would more than negate anything paid in taxes.  Some examples include EITC, SNAP, Savers Credit, ACA (Obmacare)/Medicaid/CHIP and CTC (child tax credit).

Payroll taxes on $14k is about $850, which isn't much compared to the benefits listed above.  State and local taxes may also be reduced depending on the location. 

Yeah, I agree. It is hard to find a good metric of the total tax burden for various income tax brackets, but I think we can agree that looking at only federal income tax data is the wrong way of looking at it. Sales tax, locality flat tax, and payroll taxes are all regressive and by definition affect those making less money and spending a greater percentage of their income than savers and high income workers. Focusing on the bottom 20% or even the bottom 40% is probably the wrong place to look anyway for this exercise and is really a strawman as what can we really tax from this group making less than 30k?

Let's look at the data that hits a little closer to home for the posters here. The 80th percentile (75k) and 90th percentile (115k), why are those two groups paying approximately the same tax rate as the top 1% making 1.5M?

The 90th percentile is paying a 7% payroll tax on 100% of their income while the top 1% have payroll tax on 9% of their income. Sprinkle in local tax exemption of on dividends, 20% tax rates on capital gains and dividends and that unfair high federal income tax rate on the wealthy moves to parity with those making 15x to 20x less.

Like I said before. It is really W2 wage earners who are getting the short end of the stick with the current tax code. At any rate, the current push to provide tax "relief" for those making over 250K is a bit disingenuous. The people in this country who are really taxed the hardest are those W2 wage earners making 250k - 500k range. They make just enough money that 401k deductions don't help much on an absolute basis, AMT reduces deductions, and they are well in the top tax brackets with no relief of taking income from tax advantaged sources. The top 1% like to nestle in with this group when commiserating over their tax burden but in reality, the tax code is far different for the two groups.     

Accountant007

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Re: Inequality: the long view
« Reply #72 on: June 27, 2017, 02:24:06 PM »
Also, most people have no clue what the wealth distribution really looks like in the the US.

Here's a good 6 minute YouTube primer graphically showing what 'ideal', perceived, and actual wealth distribution in the US looks like.  Pretty shocking.

Politicians thrive on keeping the 99% uninformed, bickering, and emotional.  And now there's this new invention of slapping the label 'fake news' on inconvenient truths.  But the fact people perceive (or decieve themselves) like the US has some healthy middle class '1950s' wealth distribution goes to show that people are not informed or just can't conceive of what the concentration of the top 1% wealth looks like. 

If you look at the top 1% of global wealth, you are looking at someone with a net worth of around 775K (includes home equity).  That would include a sizeable number of us in this forum.  Top 1% of wage earners globally earn in the neighborhood of 32K.  I would guess that would be a good many of us here.  So if the people at the top 1% are a problem, then we all better take a good look in the mirror, instead of pointing to people even higher up the wealth ladder (extreme wealth, as we like to call it).  Just carving out our wealthy nation to determine who is the top 1% doesn't show the full picture.

I'm not sure why you argue for comparing an American's wealth to say that of a citizen of a 3rd world country (or the rest of the globe), this is completely irrelevant.  Yes, there is a lot of global inequality between rich and poor nations, but that is well beyond the scope of the problems we are discussing (which is inequality within a single developed economy (assumed by me to be the US)).  Maybe you can start another thread if you want to debate inequality between countries or in emerging countries or whatever.

I'm not saying that it's not an interesting point, just that it is a strawman when used to defend the inequality within the US.

I understand your point.  My point is that if my NW is 500K or 1M, why do I care about the guy that has a NW of 100MM?  And if I am truly concerned about the poor, am I doing something about it rather than pontificate about how the guy with 100MM should have his wealth redistributed.  I often wonder what people's motivations are in the inequality debate - concern for the poor, mad that the neighbor inherited a couple million, or just plain irritated that there are people that make substantially more than them.

Prairie Stash

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Re: Inequality: the long view
« Reply #73 on: June 27, 2017, 02:59:44 PM »
Then why don't all companies pay the minimum? At some point we all have responsibilities for our individual actions, even the Waltons. It might be a great business decision, you're still responsible for it, Economics 101 doesn't alleviate you from cause/effect. If you read the linked article, you'll see examples spanning thousands of years of rich people complaining about paying more in wages; followed by periods of adjustment.
In general companies try and pay the least for the required skills that they can get away with. The labor market is subject to supply and demand along with the rest of the free market. Basic neoclassical economic theory expects that employers are going to seek to minimize their costs, of which labor is one part.

Quote
Contrast the example of the Waltons to the american folk hero Henry Ford. He bucked your theory of and was rewarded when he paid higher wages. In modern days we have Costco vs. Walmart in the grocery wars, Costco pays more yet they also stay in business.
Look up Taylorisim or Scientific Management when you get a chance since it's the management practice that Ford subscribed to. Part of it was reducing labor costs due to turnover. Realistically you didn't need to have many skills to work for Ford on the assembly line. Anyone that could follow simple directions could do it. However, by paying higher than the $2.25/day wage of the time he was able to avoid employee turnover which in turn reduced downtime and improved line efficiency. This makes sense because even now employers want to reduce employee turnover since it can be very expensive to replace employees - cheaper to pay them just enough that they will not leave. Also, Ford didn't exactly pay his wage employees $5/day. He paid them $2.50/day with the remaining $2.50/day being a bonus that was contingent upon such things as learning English, taking classes to be "Americanized" (if an immigrant), and would only be given to women if they were unmarried.
I understand the economic theorems, I also understand some business owners are nice and some are not. The labour market is not entirely subject to supply/demand; the entire point of labour laws is to prevent companies from taking advantage of the supply demand curve. In each society it is up to the populace to determine the restrictions placed on the supply; pretty much everyone has realized that companies can't be trusted, they're self serving as you point out, whereas society needs to look out for everyone.

When you apply those theorems in the past without restrictions, what's happened to the society? Allowing free rein to economic theorems is a recipe for disaster, every economist knows it. By restricting the actions of corporations you can have a functional society, that's the whole reason we have economists in power today; to determine the right level of restrictions to maintain a healthy society.

Bucksandreds

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Re: Inequality: the long view
« Reply #74 on: June 27, 2017, 04:52:58 PM »
Also, most people have no clue what the wealth distribution really looks like in the the US.

Here's a good 6 minute YouTube primer graphically showing what 'ideal', perceived, and actual wealth distribution in the US looks like.  Pretty shocking.

Politicians thrive on keeping the 99% uninformed, bickering, and emotional.  And now there's this new invention of slapping the label 'fake news' on inconvenient truths.  But the fact people perceive (or decieve themselves) like the US has some healthy middle class '1950s' wealth distribution goes to show that people are not informed or just can't conceive of what the concentration of the top 1% wealth looks like. 

If you look at the top 1% of global wealth, you are looking at someone with a net worth of around 775K (includes home equity).  That would include a sizeable number of us in this forum.  Top 1% of wage earners globally earn in the neighborhood of 32K.  I would guess that would be a good many of us here.  So if the people at the top 1% are a problem, then we all better take a good look in the mirror, instead of pointing to people even higher up the wealth ladder (extreme wealth, as we like to call it).  Just carving out our wealthy nation to determine who is the top 1% doesn't show the full picture.

I'm not sure why you argue for comparing an American's wealth to say that of a citizen of a 3rd world country (or the rest of the globe), this is completely irrelevant.  Yes, there is a lot of global inequality between rich and poor nations, but that is well beyond the scope of the problems we are discussing (which is inequality within a single developed economy (assumed by me to be the US)).  Maybe you can start another thread if you want to debate inequality between countries or in emerging countries or whatever.

I'm not saying that it's not an interesting point, just that it is a strawman when used to defend the inequality within the US.

I understand your point.  My point is that if my NW is 500K or 1M, why do I care about the guy that has a NW of 100MM?  And if I am truly concerned about the poor, am I doing something about it rather than pontificate about how the guy with 100MM should have his wealth redistributed.  I often wonder what people's motivations are in the inequality debate - concern for the poor, mad that the neighbor inherited a couple million, or just plain irritated that there are people that make substantially more than them.

The motivation is typically that the US has been at it's 'peak' of growth and comparative strength when inequality was low. Also please compare the 10 most equal countries in the world to the10 least and let me know where you'd rather live. I suspect you already knew this but, as typical of the right,you muddy the water when faced with an answer that doesn't suit your world view.

[MOD NOTE: please avoid the sweeping generalizations.]
« Last Edit: June 29, 2017, 06:51:46 AM by FrugalToque »

sokoloff

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Re: Inequality: the long view
« Reply #75 on: June 27, 2017, 06:13:21 PM »
The motivation is typically that the US has been at it's 'peak' of growth and comparative strength when inequality was low. Also please compare the 10 most equal countries in the world to the10 least and let me know where you'd rather live. I suspect you already knew this but, as typical of the right, you muddy the water when faced with an answer that doesn't suit your world view.
The most unequal countries by Gini index (Central African Republic, Botswana, Haiti, Namibia, South Africa) are not a problem so much because of the inequality, but because the absolute low level of GDP per capita (where they rank 186, 72, 169, 100, and 88 out of 186 countries listed). You are literally looking at the poorest country in the world and suggesting it sucks to live there because of the inequality. I'm sorry, but I don't buy it.

The 5 most equal countries by Gini index (Ukraine, Slovenia, Norway, Slovak Republic, Czech Republic) rank 113, 37, 6, 39, and 36 out of 186 in GDP per capita. Hey, those places where I might prefer to live are a lot richer than the poor countries, but I'm sure the primary reason I'd like to live there because of the income equality not the relative richness. Once again, not buying it.

The correlation between "where I want to live" and "rich country" is much, much stronger than "equal country".

Alim Nassor

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Re: Inequality: the long view
« Reply #76 on: June 27, 2017, 06:35:59 PM »
Also, most people have no clue what the wealth distribution really looks like in the the US.

Here's a good 6 minute YouTube primer graphically showing what 'ideal', perceived, and actual wealth distribution in the US looks like.  Pretty shocking.

Politicians thrive on keeping the 99% uninformed, bickering, and emotional.  And now there's this new invention of slapping the label 'fake news' on inconvenient truths.  But the fact people perceive (or decieve themselves) like the US has some healthy middle class '1950s' wealth distribution goes to show that people are not informed or just can't conceive of what the concentration of the top 1% wealth looks like. 

If you look at the top 1% of global wealth, you are looking at someone with a net worth of around 775K (includes home equity).  That would include a sizeable number of us in this forum.  Top 1% of wage earners globally earn in the neighborhood of 32K.  I would guess that would be a good many of us here.  So if the people at the top 1% are a problem, then we all better take a good look in the mirror, instead of pointing to people even higher up the wealth ladder (extreme wealth, as we like to call it).  Just carving out our wealthy nation to determine who is the top 1% doesn't show the full picture.

I'm not sure why you argue for comparing an American's wealth to say that of a citizen of a 3rd world country (or the rest of the globe), this is completely irrelevant.  Yes, there is a lot of global inequality between rich and poor nations, but that is well beyond the scope of the problems we are discussing (which is inequality within a single developed economy (assumed by me to be the US)).  Maybe you can start another thread if you want to debate inequality between countries or in emerging countries or whatever.

I'm not saying that it's not an interesting point, just that it is a strawman when used to defend the inequality within the US.

I understand your point.  My point is that if my NW is 500K or 1M, why do I care about the guy that has a NW of 100MM?  And if I am truly concerned about the poor, am I doing something about it rather than pontificate about how the guy with 100MM should have his wealth redistributed.  I often wonder what people's motivations are in the inequality debate - concern for the poor, mad that the neighbor inherited a couple million, or just plain irritated that there are people that make substantially more than them.

The motivation is typically that the US has been at it's 'peak' of growth and comparative strength when inequality was low. Also please compare the 10 most equal countries in the world to the10 least and let me know where you'd rather live. I suspect you already knew this but, as typical of the right, you muddy the water when faced with an answer that doesn't suit your world view.

Could you be a little more condescending?

sokoloff

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Re: Inequality: the long view
« Reply #77 on: June 27, 2017, 06:43:20 PM »
Could you be a little more condescending?
He seems to be trying his best.

(edited for slightly less snark)
« Last Edit: June 27, 2017, 06:54:23 PM by sokoloff »

radicaledward

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Re: Inequality: the long view
« Reply #78 on: June 27, 2017, 09:04:56 PM »
When you apply those theorems in the past without restrictions, what's happened to the society? Allowing free rein to economic theorems is a recipe for disaster, every economist knows it. By restricting the actions of corporations you can have a functional society, that's the whole reason we have economists in power today; to determine the right level of restrictions to maintain a healthy society.
I don't think this will come as a surprise to you, but those of us that study economics don't agree on the right level of restrictions. ;)

EscapeVelocity2020

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Re: Inequality: the long view
« Reply #79 on: June 28, 2017, 12:54:00 AM »
When you apply those theorems in the past without restrictions, what's happened to the society? Allowing free rein to economic theorems is a recipe for disaster, every economist knows it. By restricting the actions of corporations you can have a functional society, that's the whole reason we have economists in power today; to determine the right level of restrictions to maintain a healthy society.
I don't think this will come as a surprise to you, but those of us that study economics don't agree on the right level of restrictions. ;)
Yeah, I'm so confused.  There was Laissez Faire (capitalism leading to monopoly) and Locke arguing for as little constraint as possible at some point, and then communism and socialism on the other side.  But economic theorems have become much more nuanced.  For instance, what about Hayek and Austrian Economics?  Many economic theorems have become evolved models, so it is hard to say that following an economic model is a recipe for disaster.  But I still think that the Fed holds the reins on this horse and corporations do their best given their circumstances and playing field.

It is also quite possible, in America today, if people complained enough and voted with their dollars - that the majority could still affect the minority.  If we don't like how WalMart pays workers, we'll take our business elsewhere or refuse to 'enjoy' cheap stuff until they pay their workers better.  But that is such a fantasy.  For every one or two people  that can afford to reduce their consumption at WalMart out of 'principle', 10+ more people are finding themselves shopping there out of necessity.
Transitioning to FIRE'd albeit somewhat cautiously...

ooeei

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Re: Inequality: the long view
« Reply #80 on: June 28, 2017, 07:41:32 AM »
Then why don't all companies pay the minimum? At some point we all have responsibilities for our individual actions, even the Waltons. It might be a great business decision, you're still responsible for it, Economics 101 doesn't alleviate you from cause/effect. If you read the linked article, you'll see examples spanning thousands of years of rich people complaining about paying more in wages; followed by periods of adjustment.

Contrast the example of the Waltons to the american folk hero Henry Ford. He bucked your theory of and was rewarded when he paid higher wages. In modern days we have Costco vs. Walmart in the grocery wars, Costco pays more yet they also stay in business.

Plenty of companies pay better than Walmart.  If that is so good for business, why is Walmart so much more successful than they are?  Because that money has to come from somewhere, and all grocery stores have very thin margins.  That somewhere is the customers.  Many customers shop for the cheapest prices they can get, those prices are at Walmart. A big part of that is that they pay their employees as little as possible.

Whole Foods is a great example of a company that pays well, has very knowledgeable staff, encourages people to eat healthy, and is very pleasant to shop in. Hell it was always on the list of best companies to work for.  It should work perfectly! Except you have to pay for all of those things somehow, which means you have to charge more for comparable items.

Walmart's crazy success is proof that their strategy works. If you think you can do better than they can by paying employees more, I'd encourage you to try.

I should have expounded on the graphic. I stated the top 20% hold 85% of the wealth as support that maybe they should pay 85% of the taxes and the graph wasn't as lopsided as it appeared at first. The problem is federal income tax and most state income tax is the only progressive tax we have. Once you consider the regressive taxes: payroll, property, sales tax, and some state taxes you get a different perspective:


http://ctj.org/ctjreports/2014/04/who_pays_taxes_in_america_in_2014.php#.WVKjS8_ytOQ

In a progressive tax system you would expect the top earners to pay a much higher percentage of their total income than those at the bottom. In reality, the US is closer to a 30% flat tax across the board.

Does this graphic take into account the personal exemption and standard deduction?  Once you take those into account, the person making $45500 pays more like 10%.  The person making $14000 pays 3%.  Granted that's Federal taxes, but that's a significant difference for someone in that tax bracket, and when multiplied out by a few million people adds up significantly. 

Then if you look at what is actually paid, the bottom 45% of people pay 0 federal income tax.  Again, not an insignificant number.  Granted, there are sales taxes and car registration and things like that which they do pay, and which are significant for them, but the 0 income tax is a pretty big thing that your graphic doesn't show.
« Last Edit: June 28, 2017, 07:55:35 AM by ooeei »

Bucksandreds

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Re: Inequality: the long view
« Reply #81 on: June 28, 2017, 07:58:48 AM »
The motivation is typically that the US has been at it's 'peak' of growth and comparative strength when inequality was low. Also please compare the 10 most equal countries in the world to the10 least and let me know where you'd rather live. I suspect you already knew this but, as typical of the right, you muddy the water when faced with an answer that doesn't suit your world view.
The most unequal countries by Gini index (Central African Republic, Botswana, Haiti, Namibia, South Africa) are not a problem so much because of the inequality, but because the absolute low level of GDP per capita (where they rank 186, 72, 169, 100, and 88 out of 186 countries listed). You are literally looking at the poorest country in the world and suggesting it sucks to live there because of the inequality. I'm sorry, but I don't buy it.

The 5 most equal countries by Gini index (Ukraine, Slovenia, Norway, Slovak Republic, Czech Republic) rank 113, 37, 6, 39, and 36 out of 186 in GDP per capita. Hey, those places where I might prefer to live are a lot richer than the poor countries, but I'm sure the primary reason I'd like to live there because of the income equality not the relative richness. Once again, not buying it.

The correlation between "where I want to live" and "rich country" is much, much stronger than "equal country".

Can't get your link to open. Please let me see your info but please make sure that it's after taxes and transfers as that's the only relevant equality measure for a discussion about economic equality in the 'real world' pretty sure that Ukraine isn't there. Also your assertion that the countries on the more equal side are just better because they're richer does not demonstrate anything other than a subjective guess.

index

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Re: Inequality: the long view
« Reply #82 on: June 28, 2017, 08:29:54 AM »
I should have expounded on the graphic. I stated the top 20% hold 85% of the wealth as support that maybe they should pay 85% of the taxes and the graph wasn't as lopsided as it appeared at first. The problem is federal income tax and most state income tax is the only progressive tax we have. Once you consider the regressive taxes: payroll, property, sales tax, and some state taxes you get a different perspective:


http://ctj.org/ctjreports/2014/04/who_pays_taxes_in_america_in_2014.php#.WVKjS8_ytOQ

In a progressive tax system you would expect the top earners to pay a much higher percentage of their total income than those at the bottom. In reality, the US is closer to a 30% flat tax across the board.

Does this graphic take into account the personal exemption and standard deduction?  Once you take those into account, the person making $45500 pays more like 10%.  The person making $14000 pays 3%.  Granted that's Federal taxes, but that's a significant difference for someone in that tax bracket, and when multiplied out by a few million people adds up significantly. 

Then if you look at what is actually paid, the bottom 45% of people pay 0 federal income tax.  Again, not an insignificant number.  Granted, there are sales taxes and car registration and things like that which they do pay, and which are significant for them, but the 0 income tax is a pretty big thing that your graphic doesn't show.

Yeah, I looked into it a bit and it does take exemptions into account. What you have to remember is that person making 45k pays 7.65% FICA taxes on 100% of their income; 4-8% in state taxes; and 0-2% local taxes; That brings them up to 22 - 27% right there; add a 6% sales tax to that if they are spending 50% of the money make and you are at 30%.

Play around with this calculator for your local area:
https://smartasset.com/taxes/income-taxes#VW0hm6Av0V

What you really need to pay attention too though and what actually affects the people who consider themselves middle class (most of them are not) on this forum is this:

Focusing on the bottom 20% or even the bottom 40% is probably the wrong place to look anyway for this exercise and is really a strawman as what can we really tax from this group making less than 30k?

Let's look at the data that hits a little closer to home for the posters here. The 80th percentile (75k) and 90th percentile (115k), why are those two groups paying approximately the same tax rate as the top 1% making 1.5M?

The 90th percentile is paying a 7% payroll tax on 100% of their income while the top 1% have payroll tax on 9% of their income. Sprinkle in local tax exemption of on dividends, 20% tax rates on capital gains and dividends and that unfair high federal income tax rate on the wealthy moves to parity with those making 15x to 20x less.

Like I said before. It is really W2 wage earners who are getting the short end of the stick with the current tax code. At any rate, the current push to provide tax "relief" for those making over 250K is a bit disingenuous. The people in this country who are really taxed the hardest are those W2 wage earners making 250k - 500k range. They make just enough money that 401k deductions don't help much on an absolute basis, AMT reduces deductions, and they are well in the top tax brackets with no relief of taking income from tax advantaged sources. The top 1% like to nestle in with this group when commiserating over their tax burden but in reality, the tax code is far different for the two groups.     

Prairie Stash

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Re: Inequality: the long view
« Reply #83 on: June 28, 2017, 08:33:10 AM »
When you apply those theorems in the past without restrictions, what's happened to the society? Allowing free rein to economic theorems is a recipe for disaster, every economist knows it. By restricting the actions of corporations you can have a functional society, that's the whole reason we have economists in power today; to determine the right level of restrictions to maintain a healthy society.
I don't think this will come as a surprise to you, but those of us that study economics don't agree on the right level of restrictions. ;)
Obviously, or we wouldn't need to study economics ;)


Prairie Stash

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Re: Inequality: the long view
« Reply #84 on: June 28, 2017, 09:26:12 AM »
Then why don't all companies pay the minimum? At some point we all have responsibilities for our individual actions, even the Waltons. It might be a great business decision, you're still responsible for it, Economics 101 doesn't alleviate you from cause/effect. If you read the linked article, you'll see examples spanning thousands of years of rich people complaining about paying more in wages; followed by periods of adjustment.

Contrast the example of the Waltons to the american folk hero Henry Ford. He bucked your theory of and was rewarded when he paid higher wages. In modern days we have Costco vs. Walmart in the grocery wars, Costco pays more yet they also stay in business.

Plenty of companies pay better than Walmart.  If that is so good for business, why is Walmart so much more successful than they are?  Because that money has to come from somewhere, and all grocery stores have very thin margins.  That somewhere is the customers.  Many customers shop for the cheapest prices they can get, those prices are at Walmart. A big part of that is that they pay their employees as little as possible.

Whole Foods is a great example of a company that pays well, has very knowledgeable staff, encourages people to eat healthy, and is very pleasant to shop in. Hell it was always on the list of best companies to work for.  It should work perfectly! Except you have to pay for all of those things somehow, which means you have to charge more for comparable items.

Walmart's crazy success is proof that their strategy works. If you think you can do better than they can by paying employees more, I'd encourage you to try.

I should have expounded on the graphic. I stated the top 20% hold 85% of the wealth as support that maybe they should pay 85% of the taxes and the graph wasn't as lopsided as it appeared at first. The problem is federal income tax and most state income tax is the only progressive tax we have. Once you consider the regressive taxes: payroll, property, sales tax, and some state taxes you get a different perspective:


Where I live, Walmart workers are paid higher wages and don't rely on food stamps. Even Walmart, your shining example, has alternate business practices that are successful. So Walmart has tried exactly what you suggested I try and succeeded; in other countries.

Even within the USA there are different wages depending on the state. How is it that Walmart can be successful, paying higher wages in some places than others? California pays $10.50, Washington pays $11.00 and on the other end Alabama is at $7.25, 30% less. How is it Walmart, with a 30% difference on minimum wage depending on the state, is also found everywhere? If minimum wage was the sole difference, wouldn't the 30% difference in minimum wages offset their razor thin margins of 5-10%?

Please note, I recognize their business success, they make a lot of money, no arguments.

sokoloff

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Re: Inequality: the long view
« Reply #85 on: June 28, 2017, 10:01:38 AM »
Can't get your link to open.
I don't know. They're just web links and should work on any browser.
Please let me see your info but please make sure that it's after taxes and transfers as that's the only relevant equality measure for a discussion about economic equality in the 'real world' pretty sure that Ukraine isn't there. Also your assertion that the countries on the more equal side are just better because they're richer does not demonstrate anything other than a subjective guess.
Take a look at any given list of countries. Mark in red those countries where you subjectively believe you wouldn't want to live. Mark in green those countries where you subjectively think you would want to live.

Then, sort those countries by Gini index (before or after transfers) or any other measure of inequality and take a look at the pattern of red and green. Then sort that same list of countries by per capita GDP and look at the pattern of red and green.

My belief is that most people would have a stronger correlation between "green" and "rich" than "green" and "equal". When I did that exercise, the lowest per capita GDP country that I was willing to live in was Belize, then a gap to Costa Rica, then a long gap to the Czech Republic. Looking at a measure of income inequality, Belize and Costa Rica are quite unequal and Czech Republic is quite equal.  (It's also worth noting that my experiences in Belize and Costa Rica are no doubt colored by living on the unequal side of those countries, further reinforcing my unsurprising opinion of "it's better to live rich". A condo in downtown Jaco is not representative of average or median Tico living...)

ooeei

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Re: Inequality: the long view
« Reply #86 on: June 28, 2017, 10:07:05 AM »
Yeah, I looked into it a bit and it does take exemptions into account. What you have to remember is that person making 45k pays 7.65% FICA taxes on 100% of their income; 4-8% in state taxes; and 0-2% local taxes; That brings them up to 22 - 27% right there; add a 6% sales tax to that if they are spending 50% of the money make and you are at 30%.

Play around with this calculator for your local area:
https://smartasset.com/taxes/income-taxes#VW0hm6Av0V

Good point, I always forget about FICA.

Quote
What you really need to pay attention too though and what actually affects the people who consider themselves middle class (most of them are not) on this forum is this:

Focusing on the bottom 20% or even the bottom 40% is probably the wrong place to look anyway for this exercise and is really a strawman as what can we really tax from this group making less than 30k?

Let's look at the data that hits a little closer to home for the posters here. The 80th percentile (75k) and 90th percentile (115k), why are those two groups paying approximately the same tax rate as the top 1% making 1.5M?

The 90th percentile is paying a 7% payroll tax on 100% of their income while the top 1% have payroll tax on 9% of their income. Sprinkle in local tax exemption of on dividends, 20% tax rates on capital gains and dividends and that unfair high federal income tax rate on the wealthy moves to parity with those making 15x to 20x less.

Like I said before. It is really W2 wage earners who are getting the short end of the stick with the current tax code. At any rate, the current push to provide tax "relief" for those making over 250K is a bit disingenuous. The people in this country who are really taxed the hardest are those W2 wage earners making 250k - 500k range. They make just enough money that 401k deductions don't help much on an absolute basis, AMT reduces deductions, and they are well in the top tax brackets with no relief of taking income from tax advantaged sources. The top 1% like to nestle in with this group when commiserating over their tax burden but in reality, the tax code is far different for the two groups.     

I get it, if reducing inequality through taxation is the goal, that makes a lot of sense.  That's not everyone's idea of what taxes should be used for.

As for capital gains vs W2, yeah our tax system is set up for capital gains to be taxed differently, because they are different. The corporations are already paying taxes, now you want to tax them again when they give out their profits. It's like if you got taxed for going to work, then got taxed again for cashing your paycheck.  It doesn't make much sense unless you want to discourage people from investing.  The fact that capital gains can be structured so flexibly makes it even more difficult to tax without just harming poor investors.  Rich people can move their money to other countries, set it aside for 20 years without realizing any capital gains, and all sorts of strategies poorer investors can't do.

Where I live, Walmart workers are paid higher wages and don't rely on food stamps. Even Walmart, your shining example, has alternate business practices that are successful. So Walmart has tried exactly what you suggested I try and succeeded; in other countries.

Even within the USA there are different wages depending on the state. How is it that Walmart can be successful, paying higher wages in some places than others? California pays $10.50, Washington pays $11.00 and on the other end Alabama is at $7.25, 30% less. How is it Walmart, with a 30% difference on minimum wage depending on the state, is also found everywhere? If minimum wage was the sole difference, wouldn't the 30% difference in minimum wages offset their razor thin margins of 5-10%?

Please note, I recognize their business success, they make a lot of money, no arguments.

Yeah and in those places are all of the prices the same?  I very much doubt it.  Even if the prices are the same, those places may have demographics that buy more of the higher margin items, making up the difference.  I'm not sure, maybe those locations are just less profitable, or maybe they hire 30% less workers to do the same jobs.  I do know that my girlfriend lived in LA for two months this year, and she was shocked at the grocery prices. I'm not sure if she shopped at Walmart, but in general everything was more expensive than it is here in Texas.

Sure they could pay $10.50 in Alabama, but then another grocery store nearby will open up who pays $7.25 and undercuts all of their prices, eventually running them out of business because people want to shop at the place that charges less.  There are all sorts of other factors like their negotiating power and quantity discounts, but all things being equal a store that pays more for employees has to charge more. 

For what it's worth, Walmart does provide a pretty solid career path for people who take it seriously and want to be promoted up the ranks.  You can get all sorts of jobs above minimum wage with a little initiative working there.  Even the low on the totem pole jobs get raises over time.  Half of their workers are full time.

I think it's very odd that we've come to expect a cashier job that can be learned in a week to pay for someone's entire budget and their healthcare. It's a starter job for someone with no skills.

Accountant007

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Re: Inequality: the long view
« Reply #87 on: June 28, 2017, 10:30:34 AM »
Very well put, ooeei!

shenlong55

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Re: Inequality: the long view
« Reply #88 on: June 28, 2017, 11:33:03 AM »
As for capital gains vs W2, yeah our tax system is set up for capital gains to be taxed differently, because they are different. The corporations are already paying taxes, now you want to tax them again when they give out their profits. It's like if you got taxed for going to work, then got taxed again for cashing your paycheck.  It doesn't make much sense unless you want to discourage people from investing.

I know, right!  Double taxation is so unfair.  Why should I pay a sales/property tax when I've already paid income taxes on that money!?
« Last Edit: June 28, 2017, 11:37:43 AM by shenlong55 »

Virtus

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Re: Inequality: the long view
« Reply #89 on: June 28, 2017, 11:33:41 AM »

I think ctj.org is a partisan organization (they are a progressive lobbying group).  I think the information presented may be skewed to help push for the changes they are lobbying for. 

CBPP is non-partisan - This is a pretty good article with their take on tax rates for low income:
http://www.cbpp.org/research/policymakers-often-overstate-marginal-tax-rates-for-lower-income-workers-and-gloss-over-0

The lowest income group often has negative federal tax rates, which is ignored by the ctj article.  The ctj image shows the average income of $14k for the lowest 20%.  At this income level, families are eligible for numerous assistance programs that would more than negate anything paid in taxes.  Some examples include EITC, SNAP, Savers Credit, ACA (Obmacare)/Medicaid/CHIP and CTC (child tax credit).

Payroll taxes on $14k is about $850, which isn't much compared to the benefits listed above.  State and local taxes may also be reduced depending on the location. 

Yeah, I agree. It is hard to find a good metric of the total tax burden for various income tax brackets, but I think we can agree that looking at only federal income tax data is the wrong way of looking at it. Sales tax, locality flat tax, and payroll taxes are all regressive and by definition affect those making less money and spending a greater percentage of their income than savers and high income workers. Focusing on the bottom 20% or even the bottom 40% is probably the wrong place to look anyway for this exercise and is really a strawman as what can we really tax from this group making less than 30k?

Let's look at the data that hits a little closer to home for the posters here. The 80th percentile (75k) and 90th percentile (115k), why are those two groups paying approximately the same tax rate as the top 1% making 1.5M?

The 90th percentile is paying a 7% payroll tax on 100% of their income while the top 1% have payroll tax on 9% of their income. Sprinkle in local tax exemption of on dividends, 20% tax rates on capital gains and dividends and that unfair high federal income tax rate on the wealthy moves to parity with those making 15x to 20x less.

Like I said before. It is really W2 wage earners who are getting the short end of the stick with the current tax code. At any rate, the current push to provide tax "relief" for those making over 250K is a bit disingenuous. The people in this country who are really taxed the hardest are those W2 wage earners making 250k - 500k range. They make just enough money that 401k deductions don't help much on an absolute basis, AMT reduces deductions, and they are well in the top tax brackets with no relief of taking income from tax advantaged sources. The top 1% like to nestle in with this group when commiserating over their tax burden but in reality, the tax code is far different for the two groups.     

Actually its investors who are getting the short end of the stick. Say there are two individuals, one an investor in a hospital and another a doctor who owns his own practice. Both the hospital and doctor have EBT of $20 million (on an income tax basis of accounting). The Doctor's partnership (Assuming married and no other income) will have a tax bill of $7.9 million or 39.3%. The investor, assuming he wants to take as much money as possible home, will first have his earnings taxed while at the corporation. The Company would pay $7 million or 35% then the investor has to pay (Assuming LTCG) another $1.95 million.

To summarize:

Investor: $20 million income = $8.95 million tax or 44.75%
Doctor with partnership: $20 million income = $7.9 million tax or 39.3%

MrMoogle

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Re: Inequality: the long view
« Reply #90 on: June 28, 2017, 11:41:37 AM »
As for capital gains vs W2, yeah our tax system is set up for capital gains to be taxed differently, because they are different. The corporations are already paying taxes, now you want to tax them again when they give out their profits. It's like if you got taxed for going to work, then got taxed again for cashing your paycheck.  It doesn't make much sense unless you want to discourage people from investing.

I know, right!  Double taxation is so unfair.  Why should I pay a sales/property tax when I've already paid income taxes on that money!?
Federally you don't pay income taxes then sales/property.  But Federally, businesses pay taxes, then you pay taxes on dividends and capital gains based on money already taxed.  Sure some things get taxed double federally, but it's not as common. 

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Re: Inequality: the long view
« Reply #91 on: June 28, 2017, 11:53:31 AM »

I get it, if reducing inequality through taxation is the goal, that makes a lot of sense.  That's not everyone's idea of what taxes should be used for.

As for capital gains vs W2, yeah our tax system is set up for capital gains to be taxed differently, because they are different. The corporations are already paying taxes, now you want to tax them again when they give out their profits. It's like if you got taxed for going to work, then got taxed again for cashing your paycheck.  It doesn't make much sense unless you want to discourage people from investing.  The fact that capital gains can be structured so flexibly makes it even more difficult to tax without just harming poor investors.  Rich people can move their money to other countries, set it aside for 20 years without realizing any capital gains, and all sorts of strategies poorer investors can't do.


I would agree anyone who is conservative leaning doesn't think taxes should be used to reduce inequality. The basic premise of the article that started the thread is, throughout history, the only way inequality has been reduced is through violence or plague. I would like to think the US is forward looking enough to engineer social change in a way that doesn't require a significant reduction in population.

Inequality has been growing since 1980.

 
http://www.cbpp.org/research/poverty-and-inequality/a-guide-to-statistics-on-historical-trends-in-income-inequality

This is what tax rates have been doing:

   

Back in the conservative glory days of the 1950s - 1980s, the country accomplished that with high taxes on the top 0.1% and union membership was strong. If you are opposed to raising taxes, what mechanism does society have?

Maybe it is a progressive liberal snowflake idea to think there must be a way to accomplish this and go back to a time when all income brackets enjoyed the gains of the economy at a similar rate. I am not saying people in the 1% didn't work harder, are smarter, got luckier, or were born well and don't deserve their place.

Surely, even far right conservatives, see a problem when the bottom 20% has seen no a change in real income for almost 40 years, is making 20% more money, and the top 5% are making 75% more. To put it yearly; the annual raise for the bottom 20% is 0, the median is 0.5%, and the top 5% are getting a 2% annual raise.

Raising taxes on the top 1% doesn't necessarily mean the government is the one taking the windfall either. If you are a business owner being taxed obscenely, maybe you start giving to a tax deductible charity or pay your employees more to reduce your tax burden.
   

shenlong55

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Re: Inequality: the long view
« Reply #92 on: June 28, 2017, 11:57:07 AM »
As for capital gains vs W2, yeah our tax system is set up for capital gains to be taxed differently, because they are different. The corporations are already paying taxes, now you want to tax them again when they give out their profits. It's like if you got taxed for going to work, then got taxed again for cashing your paycheck.  It doesn't make much sense unless you want to discourage people from investing.

I know, right!  Double taxation is so unfair.  Why should I pay a sales/property tax when I've already paid income taxes on that money!?
Federally you don't pay income taxes then sales/property.  But Federally, businesses pay taxes, then you pay taxes on dividends and capital gains based on money already taxed.  Sure some things get taxed double federally, but it's not as common.

I'm not sure why that distinction matters.  I don't think I should have to pay taxes twice on the same money.  I don't care who's taking the money, just that they're double dipping.

sokoloff

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Re: Inequality: the long view
« Reply #93 on: June 28, 2017, 12:06:48 PM »
Surely, even far right conservatives, see a problem when the bottom 20% has seen no a change in real income for almost 40 years, is making 20% more money, and the top 5% are making 75% more. To put it yearly; the annual raise for the bottom 20% is 0, the median is 0.5%, and the top 5% are getting a 2% annual raise.
Why should we expect that everyone should see a sustained increase in real income? It's a fair question to ask why the top 5% saw their real income rise by a CAGR of 1.4% (not 2%), but for me, the default assumption is that real wages should remain constant over a long period of time, under the theory that wages represent a claim check on someone else's labor. (You work job X, get money, which you use to pay person Y doing job Z to provide you some good/service, who takes the money and pays person O to do job P to provide them some good/service, etc, etc.)

You earn claim checks on a certain number of hours of labor by your labor (representing your real wages). The idea that everyone should earn more claim checks on other's labor is unsustainable in my opinion.

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Re: Inequality: the long view
« Reply #94 on: June 28, 2017, 12:22:29 PM »
Surely, even far right conservatives, see a problem when the bottom 20% has seen no a change in real income for almost 40 years, is making 20% more money, and the top 5% are making 75% more. To put it yearly; the annual raise for the bottom 20% is 0, the median is 0.5%, and the top 5% are getting a 2% annual raise.
Why should we expect that everyone should see a sustained increase in real income? It's a fair question to ask why the top 5% saw their real income rise by a CAGR of 1.4% (not 2%), but for me, the default assumption is that real wages should remain constant over a long period of time, under the theory that wages represent a claim check on someone else's labor. (You work job X, get money, which you use to pay person Y doing job Z to provide you some good/service, who takes the money and pays person O to do job P to provide them some good/service, etc, etc.)

You earn claim checks on a certain number of hours of labor by your labor (representing your real wages). The idea that everyone should earn more claim checks on other's labor is unsustainable in my opinion.

The increase in real income would come from the expansion of the economy. If the GDP of the country increases by 50%, you would expect the pay of the bottom quartile to increase by 50% and the income of the top 1% to increase by 50% as well. If the top 1% get paid 50x what the bottom quartile is paid then one hour of work by the 1% individual buys 50 hours of work from that unskilled bottom quartile fellow. This is what we saw happen from 1950 to the mid 80s.

From the mid 80's till today, we saw the top 1% expand their pay to make 150x what the guy in the bottom quartile made. 

for me, the default assumption is that real wages should remain constant over a long period of time, under the theory that wages represent a claim check on someone else's labor. (You work job X, get money, which you use to pay person Y doing job Z to provide you some good/service, who takes the money and pays person O to do job P to provide them some good/service, etc, etc.)

You earn claim checks on a certain number of hours of labor by your labor (representing your real wages). The idea that everyone should earn more claim checks on other's labor is unsustainable in my opinion.

   

You are making my point for me. Why is the 1% wage earner making 150 claim checks on the bottom quartile worker today when he was making 50 claim checks every year from 1950 to 1980?

sokoloff

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Re: Inequality: the long view
« Reply #95 on: June 28, 2017, 12:31:03 PM »
The increase in real income would come from the expansion of the economy. If the GDP of the country increases by 50%, you would expect the pay of the bottom quartile to increase by 50% and the income of the top 1% to increase by 50% as well.
That is an increase in nominal income, which is not (necessarily) an increase in real income. I read your post as clearly referencing real income in the conversation and my comments were confined to real (inflation-adjusted) income.
You are making my point for me. Why is the 1% wage earner making 150 claim checks on the bottom quartile worker today when he was making 50 claim checks every year from 1950 to 1980?
Yes. I agree and acknowledged that point when I said:
It's a fair question to ask why the top 5% saw their real income rise by a CAGR of 1.4% (not 2%)


Bucksandreds

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Re: Inequality: the long view
« Reply #96 on: June 28, 2017, 12:45:02 PM »
Can't get your link to open.
I don't know. They're just web links and should work on any browser.
Please let me see your info but please make sure that it's after taxes and transfers as that's the only relevant equality measure for a discussion about economic equality in the 'real world' pretty sure that Ukraine isn't there. Also your assertion that the countries on the more equal side are just better because they're richer does not demonstrate anything other than a subjective guess.
Take a look at any given list of countries. Mark in red those countries where you subjectively believe you wouldn't want to live. Mark in green those countries where you subjectively think you would want to live.

Then, sort those countries by Gini index (before or after transfers) or any other measure of inequality and take a look at the pattern of red and green. Then sort that same list of countries by per capita GDP and look at the pattern of red and green.

My belief is that most people would have a stronger correlation between "green" and "rich" than "green" and "equal". When I did that exercise, the lowest per capita GDP country that I was willing to live in was Belize, then a gap to Costa Rica, then a long gap to the Czech Republic. Looking at a measure of income inequality, Belize and Costa Rica are quite unequal and Czech Republic is quite equal.  (It's also worth noting that my experiences in Belize and Costa Rica are no doubt colored by living on the unequal side of those countries, further reinforcing my unsurprising opinion of "it's better to live rich". A condo in downtown Jaco is not representative of average or median Tico living...)

QATAR, BRUNEI and KUWAIT are in the top 6 in the world in GDP per capita. Your theory holds no water when subjected to 10 seconds of research. 

http://www.businessinsider.com/the-richest-countries-in-the-world-2017-3

BTDretire

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Re: Inequality: the long view
« Reply #97 on: June 28, 2017, 12:51:29 PM »
I disagree that the tax system in setup to favor the rich in this country.


Source http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/

What I get out of your graph is that 62.3% of the families pay only 5.6% of the taxes paid.
 Clearly those families are not over taxed. So we have 37.7% of the families paying 94.4%
of the taxes paid.
 We need to find a way to get 62.3% of the population earning a higher wage.
It is sickening to me that, "Approximately 52.2 million (or 21.3 percent) people in the U.S. participated in major means-tested government assistance programs each month in 2012, according to a U.S. Census Bureau report."
  It should not be that difficult to support yourself in America. I don't know the answer, especially after the study out of Seattle, estimates the average low-wage worker in the city lost $125 a month because of the hike in the minimum.

https://www.washingtonpost.com/news/wonk/wp/2017/06/26/new-study-casts-doubt-on-whether-a-15-minimum-wage-really-helps-workers/?utm_term=.f732d5f56094

Bucksandreds

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Re: Inequality: the long view
« Reply #98 on: June 28, 2017, 01:02:38 PM »
I disagree that the tax system in setup to favor the rich in this country.


Source http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/

What I get out of your graph is that 62.3% of the families pay only 5.6% of the taxes paid.
 Clearly those families are not over taxed. So we have 37.7% of the families paying 94.4%
of the taxes paid.
 We need to find a way to get 62.3% of the population earning a higher wage.
It is sickening to me that, "Approximately 52.2 million (or 21.3 percent) people in the U.S. participated in major means-tested government assistance programs each month in 2012, according to a U.S. Census Bureau report."
  It should not be that difficult to support yourself in America. I don't know the answer, especially after the study out of Seattle, estimates the average low-wage worker in the city lost $125 a month because of the hike in the minimum.

https://www.washingtonpost.com/news/wonk/wp/2017/06/26/new-study-casts-doubt-on-whether-a-15-minimum-wage-really-helps-workers/?utm_term=.f732d5f56094

Me Me Me! Call on me! I know the answer. Since money is finite and part of society is getting rapidly richer and the other isn't, we use taxation to make things more equal in an attempt to improve the overall quality of life and encourage growth (as demonstrated in studies by the IMF and OECD.)

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Re: Inequality: the long view
« Reply #99 on: June 28, 2017, 01:04:23 PM »
The increase in real income would come from the expansion of the economy. If the GDP of the country increases by 50%, you would expect the pay of the bottom quartile to increase by 50% and the income of the top 1% to increase by 50% as well.
That is an increase in nominal income, which is not (necessarily) an increase in real income. I read your post as clearly referencing real income in the conversation and my comments were confined to real (inflation-adjusted) income.
You are making my point for me. Why is the 1% wage earner making 150 claim checks on the bottom quartile worker today when he was making 50 claim checks every year from 1950 to 1980?
Yes. I agree and acknowledged that point when I said:
It's a fair question to ask why the top 5% saw their real income rise by a CAGR of 1.4% (not 2%)

So we agree it seems. Now I'm asking, by what means can society prevent income inequality from expanding further? I don't dispute a CEO should make 50x what the median worker makes like in 1980. This number has expanded to 400x and is still growing. The CEO now makes in an hour what the median worker (not lowest paid) makes in two months.

The article at the beginning of the thread said it would take a population reduction or event of major wealth destruction; is it impossible to reduce this discrepancy by any other means, or do we continue until music stops?