Interesting stats on # of millionaires/billionnaires in U.S.

[moonpalace]

That's an oft-touted talking point, but it's much harder to find real data on the effective tax rates paid by people at the time. Yeah the top rates around war time sometimes reached 80%, but there were exemptions so large you could drive a truck through them.

Even if that's true, the questions remain. Are we a free society now, at present rates and methods of taxation? Or are we only a free society at 0%? Somewhere in between? Could we still be free/prosperous at, say, 45%? 50%?

[Paul der Krake]

That's an oft-touted talking point, but it's much harder to find real data on the effective tax rates paid by people at the time. Yeah the top rates around war time sometimes reached 80%, but there were exemptions so large you could drive a truck through them.

Even if that's true, the questions remain. Are we a free society now, at present rates and methods of taxation? Or are we only a free society at 0%? Somewhere in between? Could we still be free/prosperous at, say, 45%? 50%?

I don't know. I'm pretty happy with things as they stand.

[MustachianAccountant]

One of the primary problems with most discussions of inequality (whether wealth or income) is that the discussion is almost universally framed in such a way to imply that the "rich" having something means that someone else doesn't. 18 million households worth $1M+ does NOT mean that other households are forced to have less. The economy doesn't prevent people from accumulating more money just because someone else has accumulated money as well. A CEO making 500 times the salary of the janitor doesn't meant the janitor is being paid less than they would be if the CEO made 5 times the salary of the janitor.

Let's start a fictional company. It has a CEO with 5 workers doing basic labor, and 1 HR person. The workers take care of cleaning up. The CEO is responsible for all 6 employees, getting customer, and taking care of running the business. It then branches out. Now the CEO has 5 managers working for him, each running one of the various lines of business, each line of business with 20 employees, HR is now a department with 2 people and they've hired a janitor. Now, the CEO is responsible for 108 employees, 5 lines of business, is still doing sales sometimes, as well as running the now 7-figure business.

So, do CEO's new responsibilities mean he should be compensated more to reflect the additional work/responsibility he has? Sure. The janitor, however, is now just doing basic labor that others used to take care of on the side of their own job so he's probably not going to make much.

If that company grows 10-fold again, the CEO is now responsible for a $70M business and over 10k employees, and maybe they go public now so he's also in charge of ensuring the shareholders are pleased. So his responsibilities have grown significantly again. Does that not warrant an increase in compensation? The janitor that was taking care of 10k sq ft of office space is, however, still just taking care of 10k sq ft of office space. Does he deserve to get paid more just because the CEO's role and responsibilities have increased? I can't find a good reason to answer that question with a "yes". So, the person with the higher level of responsibility and/or desirability in the market experiences an increase in wages as they move into roles that need those skills and/or experience while the person with no increase in their role or responsibility within an organization has stagnant wages, and the relative income between them widens.

I doubt anyone would argue that a CEO has more responsibility than the janitor, and should be compensated accordingly. That feels like a straw man. The question becomes, HOW MUCH more compensation? When the average CEO in American gets paid about 300x that of the AVERAGE employee (not the janitor, the average employee in his company), and have seen a raise of 1000% over the past 40 years (vs. employee pay increase of 11%) does that really reflect increased responsibility? (source: http://fortune.com/2015/06/22/ceo-vs-worker-pay/)

As any economy grows, the relative number of "people at the top" (who have the highly desired skills and/or experience which warrants a position with a lot more responsibility than the entry level worker) will tend to stay the same or decrease (though generally it decreases as the "top" of the pyramid gets higher instead of just having more pyramids to have someone atop). Thus, the gap between those and the people at the base level will widen.

There are only two ways I've ever heard of to combat such a thing - government mandated wages for those on the bottom (which tend to adjust relative compensation of those at the bottom most, not really addressing the broader concept) or government set wages/wage bands for everyone. Without artificial wage restrictions/mandates, those with more rare skills/experience will always see relatively higher compensation.  Thus the income inequality can only be addressed by massive interference in the compensation of employees.

That leaves the "inequality solution" really stuck with the wealth inequality side of things. The problem here is, the only "solutions" for wealth inequality are those that involve taking wealth from some people who earned it (or who were given it by those who earned it) and handing that wealth to people who didn't earn it. This works great on a small scale, when it's just a slightly higher tax rate to pay for programs that most people of moral character can get behind (taking care of the infirm, helping those in poverty, etc). When it expands beyond that, however, then you've accepted a government that is allowed to take from people without cause anytime they wish, which isn't a free society.

You could also cap CEO pay at a certain multiplier of average employee wages. Say, 100:1. The CEO can be paid 100x the average worker salary. Want to give the CEO a raise? Everyone that works for the company, and is contributing to the company, gets a raise. That's hardly "taking wealth from people who earned it, and giving to people who didn't earn it." But it is making sure that wages increase for everyone working, not just the CEO.

I don't believe you can "solve" wealth or income inequality and maintain freedom at the same time as any solution I can envision or have heard of necessarily involves the government either preventing freedom of choice for businesses (the choice to decide what income is appropriate for a given position) or the government preventing freedom of ownership (the government taking from those who have earned their compensation and deciding to give those earnings away).  We have a small amount of both right now, but as government power/interference grows then those pitchforks could just as easily be pointed at the government as they could be pointed at the wealthy.

True enough. However, if there's unfairness in the system, and the government doesn't step in, how will it get corrected? Short of, you know, pitchforks. How does the free market correct for such a problem? Those are serious questions - I'm all for a non-government solution. I just haven't heard one yet.

Or maybe there's not a problem. Maybe there's an argument to be made for CEOs getting a 1000% raise while the average worker gets 11% being "fair." I'd like to hear that as well.

[jlcnuke]

That's an oft-touted talking point, but it's much harder to find real data on the effective tax rates paid by people at the time. Yeah the top rates around war time sometimes reached 80%, but there were exemptions so large you could drive a truck through them.

Even if that's true, the questions remain. Are we a free society now, at present rates and methods of taxation? Or are we only a free society at 0%? Somewhere in between? Could we still be free/prosperous at, say, 45%? 50%?

We're "somewhat" free at the moment. If you'd like to see what it looks like when the government controls worker's pay etc, there have been multiple examples of countries that do/did that. None of them were anywhere close to "free" imo.

[jlcnuke]

I doubt anyone would argue that a CEO has more responsibility than the janitor, and should be compensated accordingly. That feels like a straw man. The question becomes, HOW MUCH more compensation? When the average CEO in American gets paid about 300x that of the AVERAGE employee (not the janitor, the average employee in his company), and have seen a raise of 1000% over the past 40 years (vs. employee pay increase of 11%) does that really reflect increased responsibility? (source: http://fortune.com/2015/06/22/ceo-vs-worker-pay/)

How much should anyone get paid? Exactly as much as the people paying them value their contributions to the business. Was there a Wal-Mart sized company in 1977 (with that many employees, that many stores, and that much revenue for the CEO to be responsible for? Hint: the answer is no. There are a LOT more massive businesses today than there were 40 years ago. The reach of the largest businesses has also grown significantly as most major US businesses 40 years ago had a large US presence and not much global presence while today global expansion is par for the course in many industries. So yes, responsibilities have grown for those in charge of the largest and most complex businesses by quite a bit. The janitor's job responsibility, arguably, is still pretty much the same.

You could also cap CEO pay at a certain multiplier of average employee wages. Say, 100:1. The CEO can be paid 100x the average worker salary. Want to give the CEO a raise? Everyone that works for the company, and is contributing to the company, gets a raise. That's hardly "taking wealth from people who earned it, and giving to people who didn't earn it." But it is making sure that wages increase for everyone working, not just the CEO.

Sure, let's cap the pay. So now we'll just double all of management's salaries so the CEO can take a raise without fucking up the job market for every position below that across the entire industry because we really want to bring in that guy who's track record of managing companies is great, and it'll give our friends some raises at the same time.

Pro-tip - if I have to pay you more, even though another company won't because your skills aren't worth it in the marketplace, then I'm giving you money you didn't earn.

True enough. However, if there's unfairness in the system, and the government doesn't step in, how will it get corrected? Short of, you know, pitchforks. How does the free market correct for such a problem? Those are serious questions - I'm all for a non-government solution. I just haven't heard one yet.

Or maybe there's not a problem. Maybe there's an argument to be made for CEOs getting a 1000% raise while the average worker gets 11% being "fair." I'd like to hear that as well.

See, here's the crux of the issue - that one person makes a lot more money than someone else ISN'T a problem. It's something for people making less to get jealous of and cry about "fairness". Want to be compensated like a respected, educated, and experienced CEO? Become a respected, educated, and experienced CEO. Or don't, but if you don't then don't whine and bitch about what the people who did are getting paid. They're getting paid that much because the market deems their skills so rare and unique that they find it worth it to pay them that much money. If you can't get those skills, find some other highly sought after skills - become an amazing athlete, become an amazing actor, etc.

Those with skills the market deems valuable will always (barring a shift towards a political system where the government controls more and more of private businesses) be paid more than those with skills that are commonplace in the market, and those with skills that are commonplace in the market will be paid more than those with no skills to offer the market.

Oh, and FYI - most CEO's aren't making the tons and tons of money discussed in articles like the one you linked. The few, at the top of the biggest corporations, are the ones skewing the average up. Median pay, however, isn't nearly as great see https://www.bls.gov/ooh/management/top-executives.htm or http://www.payscale.com/research/US/Job=Chief_Executive_Officer_(CEO)/Salary

I have zero people who report to me, am 4 levels below the CEO in my company (~$90M annual revenue) and I routinely make more than the median CEO pay per the BLS.

[jlcnuke]

I doubt anyone would argue that a CEO has more responsibility than the janitor, and should be compensated accordingly. That feels like a straw man. The question becomes, HOW MUCH more compensation? When the average CEO in American gets paid about 300x that of the AVERAGE employee (not the janitor, the average employee in his company), and have seen a raise of 1000% over the past 40 years (vs. employee pay increase of 11%) does that really reflect increased responsibility? (source: http://fortune.com/2015/06/22/ceo-vs-worker-pay/)

How much should anyone get paid? Exactly as much as the people paying them value their contributions to the business. Was there a Wal-Mart sized company in 1977 (with that many employees, that many stores, and that much revenue for the CEO to be responsible for? Hint: the answer is no. There are a LOT more massive businesses today than there were 40 years ago. The reach of the largest businesses has also grown significantly as most major US businesses 40 years ago had a large US presence and not much global presence while today global expansion is par for the course in many industries. So yes, responsibilities have grown for those in charge of the largest and most complex businesses by quite a bit. The janitor's job responsibility, arguably, is still pretty much the same.

You could also cap CEO pay at a certain multiplier of average employee wages. Say, 100:1. The CEO can be paid 100x the average worker salary. Want to give the CEO a raise? Everyone that works for the company, and is contributing to the company, gets a raise. That's hardly "taking wealth from people who earned it, and giving to people who didn't earn it." But it is making sure that wages increase for everyone working, not just the CEO.

Sure, let's cap the pay. So now we'll just double all of management's salaries so the CEO can take a raise without fucking up the job market for every position below that across the entire industry because we really want to bring in that guy who's track record of managing companies is great, and it'll give our friends some raises at the same time.

Pro-tip - if I have to pay you more, even though another company won't because your skills aren't worth it in the marketplace, then I'm giving you money you didn't earn.

True enough. However, if there's unfairness in the system, and the government doesn't step in, how will it get corrected? Short of, you know, pitchforks. How does the free market correct for such a problem? Those are serious questions - I'm all for a non-government solution. I just haven't heard one yet.

Or maybe there's not a problem. Maybe there's an argument to be made for CEOs getting a 1000% raise while the average worker gets 11% being "fair." I'd like to hear that as well.

See, here's the crux of the issue - that one person makes a lot more money than someone else ISN'T a problem and it isn't "unfair". It's something for people making less to get jealous of and cry about "fairness" when what they really mean is "I want the money he's getting" (see your example of distributing his salary to the rest of the workers, whether they've done anything to make themselves worth that additional pay or not). Want to be compensated like a respected, educated, and experienced CEO? Become a respected, educated, and experienced CEO. Or don't, but if you don't then don't whine and bitch about what the people who did are getting paid. They're getting paid that much because the market deems their skills so rare and unique that they find it worth it to pay them that much money. If you can't get those skills, find some other highly sought after skills - become an amazing athlete, become an amazing actor, etc.

Those with skills the market deems valuable will always (barring a shift towards a political system where the government controls more and more of private businesses) be paid more than those with skills that are commonplace in the market, and those with skills that are commonplace in the market will be paid more than those with no skills to offer the market.

Oh, and FYI - most CEO's aren't making the tons and tons of money discussed in articles like the one you linked. The few, at the top of the biggest corporations, are the ones skewing the average up. Median pay, however, isn't nearly as great see https://www.bls.gov/ooh/management/top-executives.htm or http://www.payscale.com/research/US/Job=Chief_Executive_Officer_(CEO)/Salary https://www.bls.gov/oes/current/oes111011.htm

I have zero people who report to me, am 4 levels below the CEO in my company (~$90M annual revenue) and I routinely make more than the median top executive pay per the BLS, though not quite to the median CEO pay.

[moonpalace]

Even if that's true, the questions remain. Are we a free society now, at present rates and methods of taxation? Or are we only a free society at 0%? Somewhere in between? Could we still be free/prosperous at, say, 45%? 50%?

We're "somewhat" free at the moment. If you'd like to see what it looks like when the government controls worker's pay etc, there have been multiple examples of countries that do/did that. None of them were anywhere close to "free" imo.

I'm just talking about marginal tax rates. I think the idea of the government directly controlling pay is a whole 'nother kettle of fish, and very likely a terrible idea. I'm just pushing back on the idea that increasing the top marginal tax rate is really such a huge deal.

[MustachianAccountant]

See, here's the crux of the issue - that one person makes a lot more money than someone else ISN'T a problem. It's something for people making less to get jealous of and cry about "fairness". Want to be compensated like a respected, educated, and experienced CEO? Become a respected, educated, and experienced CEO. Or don't, but if you don't then don't whine and bitch about what the people who did are getting paid. They're getting paid that much because the market deems their skills so rare and unique that they find it worth it to pay them that much money. If you can't get those skills, find some other highly sought after skills - become an amazing athlete, become an amazing actor, etc.

Those with skills the market deems valuable will always (barring a shift towards a political system where the government controls more and more of private businesses) be paid more than those with skills that are commonplace in the market, and those with skills that are commonplace in the market will be paid more than those with no skills to offer the market.

Oh, and FYI - most CEO's aren't making the tons and tons of money discussed in articles like the one you linked. The few, at the top of the biggest corporations, are the ones skewing the average up. Median pay, however, isn't nearly as great see https://www.bls.gov/ooh/management/top-executives.htm or http://www.payscale.com/research/US/Job=Chief_Executive_Officer_(CEO)/Salary

I have zero people who report to me, am 4 levels below the CEO in my company (~$90M annual revenue) and I routinely make more than the median CEO pay per the BLS.

I mean, if your stance is "there's no such thing as unfair pay," then I guess there's not really anything to discuss.

[Bucksandreds]

See, here's the crux of the issue - that one person makes a lot more money than someone else ISN'T a problem. It's something for people making less to get jealous of and cry about "fairness". Want to be compensated like a respected, educated, and experienced CEO? Become a respected, educated, and experienced CEO. Or don't, but if you don't then don't whine and bitch about what the people who did are getting paid. They're getting paid that much because the market deems their skills so rare and unique that they find it worth it to pay them that much money. If you can't get those skills, find some other highly sought after skills - become an amazing athlete, become an amazing actor, etc.

Those with skills the market deems valuable will always (barring a shift towards a political system where the government controls more and more of private businesses) be paid more than those with skills that are commonplace in the market, and those with skills that are commonplace in the market will be paid more than those with no skills to offer the market.

Oh, and FYI - most CEO's aren't making the tons and tons of money discussed in articles like the one you linked. The few, at the top of the biggest corporations, are the ones skewing the average up. Median pay, however, isn't nearly as great see https://www.bls.gov/ooh/management/top-executives.htm or http://www.payscale.com/research/US/Job=Chief_Executive_Officer_(CEO)/Salary

I have zero people who report to me, am 4 levels below the CEO in my company (~$90M annual revenue) and I routinely make more than the median CEO pay per the BLS.

I mean, if your stance is "there's no such thing as unfair pay," then I guess there's not really anything to discuss.

When you have your hand in the status quo cookie jar, you'll never be in favor of stopping the gravy train.

[jlcnuke]

Even if that's true, the questions remain. Are we a free society now, at present rates and methods of taxation? Or are we only a free society at 0%? Somewhere in between? Could we still be free/prosperous at, say, 45%? 50%?

We're "somewhat" free at the moment. If you'd like to see what it looks like when the government controls worker's pay etc, there have been multiple examples of countries that do/did that. None of them were anywhere close to "free" imo.

I'm just talking about marginal tax rates. I think the idea of the government directly controlling pay is a whole 'nother kettle of fish, and very likely a terrible idea. I'm just pushing back on the idea that increasing the top marginal tax rate is really such a huge deal.

Well, to be honest, marginal tax rates are really quite meaningless. At one point, the top marginal tax rate was 94%. Of course, the worst effective tax rate at that time was closer to 60% and affected like 0.01% of the population while the top 0.1% (still in that 94% tax bracket) was around 50%. When the top rate was 90%, the effective rate for the top 0.1% was in the 4x% range. Even today, with 39.6% marginal tax rates, most people in those brackets actually pay around 22-23%.

That's not to say I don't think we could tax some people more. In fact, I'd be in favor of a higher rate at a higher income level, to put that in historical context, the 94% rate didn't go into effect until you were making an inflation adjusted ~$3.4 million/year back in the 1940's. Our top rate hits at about 12% of that number currently ($417k for singles, ~$470k for married). As such, I can see a logical argument for taxing those with much higher income than our current top tax bracket.

[jlcnuke]

I mean, if your stance is "there's no such thing as unfair pay," then I guess there's not really anything to discuss.

Well, you could try to defend your stance that I can only currently summarize as "they make a lot more than other people so it isn't fair" coupled with "their pay has gone up a lot more than the average so that isn't fair". Neither of which, to me, is justification for why they shouldn't be compensated as such. That there is a disparity in pay does not, in itself, provide any justification for why the existence of a disparity is bad or "wrong".

An NFL quarterback makes exponentially more than the guy who cleans the locker room because his value to the organization is exponentially higher. As such, his exorbitant pay is in no way unfair (imo, as "fair" is completely subjective) to the janitor.

[Bucksandreds]

I mean, if your stance is "there's no such thing as unfair pay," then I guess there's not really anything to discuss.

Well, you could try to defend your stance that I can only currently summarize as "they make a lot more than other people so it isn't fair" coupled with "their pay has gone up a lot more than the average so that isn't fair". Neither of which, to me, is justification for why they shouldn't be compensated as such. That there is a disparity in pay does not, in itself, provide any justification for why the existence of a disparity is bad or "wrong".

An NFL quarterback makes exponentially more than the guy who cleans the locker room because his value to the organization is exponentially higher. As such, his exorbitant pay is in no way unfair (imo, as "fair" is completely subjective) to the janitor.

 I think what they're saying is that since countless studies (IMF and OECD as well as many others) say that high wealth and income inequality is a negative for economic growth and that many would agree is poor for the quality of life of the working poor, they are presupposing that you agree that this inequality is not good. If you see no problem with this increasing inequality then there really is nothing to converse with you about, on the subject.

[jlcnuke]

I mean, if your stance is "there's no such thing as unfair pay," then I guess there's not really anything to discuss.

Well, you could try to defend your stance that I can only currently summarize as "they make a lot more than other people so it isn't fair" coupled with "their pay has gone up a lot more than the average so that isn't fair". Neither of which, to me, is justification for why they shouldn't be compensated as such. That there is a disparity in pay does not, in itself, provide any justification for why the existence of a disparity is bad or "wrong".

An NFL quarterback makes exponentially more than the guy who cleans the locker room because his value to the organization is exponentially higher. As such, his exorbitant pay is in no way unfair (imo, as "fair" is completely subjective) to the janitor.

 I think what they're saying is that since countless studies (IMF and OECD as well as many others) say that high wealth and income inequality is a negative for economic growth and that many would agree is poor for the quality of life of the working poor, they are presupposing that you agree that this inequality is not good. If you see no problem with this increasing inequality then there really is nothing to converse with you about, on the subject.

And many other studies (from MIT to CATO) have concluded that neither income, nor wealth inequality has any significant effect on the poor and can be beneficial to the economy when it is not too high. In fact, economic mobility is, according to many economists, much more important for growth than narrowing wealthy or income inequality (some of which is theorized to be necessary for any significant growth). The big problem with economic discussions of inequality (as opposed to "fairness" talks that are rather meaningless imo) is that pretty much both sides of the discussion on economics agree that inequality is necessary for growth, but also agree that too much inequality can hamper growth, yet the data doesn't give us a good notion of the exact location of "middle ground" between the two; where there is sufficient inequality to promote growth yet not so much that growth starts to become stifled.

As I haven't seen any data yet that generates a conclusion that the current inequality has moved into the "stifles growth" territory (as other economic factors can be more directly related to recent growth trends), I don't see an economic reason to try and implement policies to reduce that inequality. Of course, recognizing that too much inequality could cause a problem, I also don't support implementing policies likely to significantly increase inequality (such as massive tax breaks for those with the highest incomes etc).

[dycker1978]

This video does one of the best jobs I have seen explaining inequality.

https://www.youtube.com/watch?v=2KlmvmuxzYE