When the Rich Said No to Getting Richer
nytimes.com
nytimes.com
The problem is that the rich have the ability to take their income in alot of different ways.
Tax income more, they'll take it as dividends.
Tax dividends more, they'll take it as capital gains.
Tax capital gains, they won't realize their capital gains until they can offset them with realized losses or they'll just get bank loans again't their stock holdings.
Tax assets on death and they'll pass them o n in trusts. Some will move money off shore if they think they can get better returns that way.
The problem is that no tax code can close all loop holes because you just can't foresee the creative ways people will out maneuver the tax code.
Who would have thought 25 years ago that companies would buy other companies in different countries, not to acquire their products or markets, but to acquire their headquarters address to lower the tax paid in the US.
I don't think anything has changed.
I disagree. I simple flat tax rate where everything is taxed at a single rate would close every single one of the loopholes above, if only by making it moot.
The fact that the rich can maneuver themselves into a much lower tax rate than the average person presents a significant, unfair advantage in my opinion. A flat tax rate would make things much more equitable. Plus it would asimplify the tax code tremendously.
edit: at that point, if we threw out the tax system, why not just get rid of states and corporations and start everything from scratch, said the junior dev
The first "bank" was also founded much earlier than 1000 years ago (and wasn't a bank), but we did know a bit about financial systems even before then.
The Code of Hammurabi describes Babylonian taxes and the manners of levy. The Egyptians and Romans levied income taxes. There is of course the gafol/Danegeld/heregald of the Anglo-Saxons. You've got taxes/tolls paid by merchants on the Silk Road and certainly I've read of taxation in Ashoka's era and other sub-continental sovereignties.
You have the taxation/feudal levy system that existed even in archaic Greece where boats, rowers and soldiers were expected to be provided by patricians in times of war.
China (especially) and Japan have long histories of taxation.
The idea that recorded human history has been mostly without tax seems to be ahistoric.
Sure. Which is why it's a bit ridiculous to say there has been a millennia of income tax we have been learning from.
Tax in general has existed - progressive income taxes, however, seem to be a fairly recent development. Purely in the administration sense, it would have been far more difficult to do in the past and as a progressive tax system does not actively benefit the people in power in a feudal or imperial government, it would be unlikely for a progressive tax to be implemented, especially one that exists in peace-time. In fact, feudal era taxes seem to have been actively regressive.
Removing a progressive tax system, something I believe is a bad idea to do, wouldn't roll things back to older systems of taxation. We wouldn't sacrifice the development of financial policies and tax frameworks, and we didn't arrive at the concept of a progressive system because of hundreds of years of failed tax policies. We have a structurally different government than countries did for hundreds of years prior.
I mean, I am not an economist, I have no idea if that would work or not(probably not)
So Amazon would own the entire supply chain: Manufacturing widgets, selling widgets, storing widgets, shipping widgets, handling returns, etc. They already sort of do this, but if you add a 20% tax at each hop they would eliminate the remaining hops as fast as they possibly can or buy the hops.
And you could never start a small business, because everyone who'd want to buy from you would save a ton of money doing it themselves. By not taxing business transactions, it's zero additional cost to have someone else do something for you, so it makes it possible to grow a small business.
In particular, grocery stores with a 2% margin would be hit hard.
By having a flat tax it doesn't make sense to shift 'money in' under different categories because all gets taxed the same rate.
So for example, income, capital gains, dividends would all be taxed at 10% or 15% or whatever.
You can already do this today. Eventually you will need to sell and pay the taxes, eg. if interest rates rise and it's no longer worth it or when you die and have to pay the loans off.
> Or, you could leave it all in a company that you own, draw no income and have the company pay for your housing, meals, travel, etc.
If your company pays for your personal expenses like housing, it's taxable as income. Lots of SV companies pay for their interns' housing and the rent was always listed on their W2's.
Sure, but it can be a strategy to reduce taxable income. My point is that people at the top end are highly incentivized to avoid taxes and will find ways to do so. I'm not making any policy prescription, tax policy is hard and I don't claim to know what's optimal or even necessarily better.
Obviously this is a terribly contrived example, but it is somewhat descriptive of the type of strategy used to reduce taxable income. Things are obviously more complicated when you have numerous types of income from domestic and foreign sources.
Keeping it in the company would then be irrelevant (the more you keep in the company by not paying yourself a salary, the higher the corporate taxes).
I also don't think you could easily manage raising the effective corporate tax rate very much without seeing further offshoring of profits, which is the present situation. We presently live in a world where capital movement has been liberalized and the movement of people(Schengen notwithstanding) has not. So even if you have some sort of profit/income agnostic flat tax, any business that can seek lower tax rates abroad will.
A (very) progressive tax rate with a few ways of reducing the tax based on social (e.g. number of children, etc) criteria would probably work better here.
People/politicians are very creative in what is to be considered essential.
But "no loophole tax" might be a better characterization of the flat idea, yes?
Maybe single means a complex function? I doubt it.
Tell this to the nations which have successfully implemented a flat tax:
http://www.economist.com/node/3860731
https://en.wikipedia.org/wiki/Flat_tax#Countries_that_have_f...
It's ironic that a number of former Soviet countries have moved on to the flat tax, while the west has a progressive income tax (#2 plank of the Communist Manifesto).
Compare them to slowly declining western European countries like Italy and Spain.
So even when tiered, a person earning under some amount in total might get a lower tax rate than a person earning a higher amount but it is still flat.
The "flat tax" would be taxed on all jurisdiction. So call it a "universal flat tax". That way, there is no persuasion to register in a foreign country and it would dissuade multi geography registrations as you would just be taxed in multiples by each territory.
To avoid double taxation, perhaps, a company can register in multiple countries but since the tax is the same everywhere, the portion of the x% taxed would be proportionally divided to the territories.
This assumes of course that the whole world agrees on one tax policy and tax havens are eliminated. :)
They say there should be a 20% tax, on any income above the $35,000 a year threshold. While it still does effect people on the lower end more, the first part of their income is at least partially untaxed.
And the bar is low enough that the super rich will not be able to create schemes to keep there income under that bar.
Remember that Flat Tax is also called Fair Tax. The concept of fairness is central.
For me personally - I would add one more change that most people don't like. I would put an actual cap on total income tax that can be paid in a single year. The reason for this is that these progressive systems act as a social welfare system that transfer money. That's why people propose a flat tax. Well, flat tax is much better but still presents the possibility for a wealthy person to pay, for example, 200k in income tax in a year. A lot of people would say "so what?". Well, I believe income tax shouldn't be treated as a maximum pain threshold. The basis of taxation is to fund public goods. We all consume roughly the same amount of public services on average. If someone is paying something like 200k a year in income tax they are paying way, way above anything they could possibly consume in public goods/services for that year.
Flat tax rate has nothing to do with the loopholes, those are completely orthogonal. You could as well say "a simple progressive tax rate ...".
If you meant to say 1) close all loopholes, and 2) implement flat tax rate, then OK, but those are still two different things. In that case, what's wrong with 1) close all loopholes, and 2) leave the progressive tax rate?
You eventually have to define your terms, and those definitions will have the loopholes embedded in them.
That's not to say that simplification is useless. It would still cut a lot of waste out of the costs of collection, enforcement, and compliance.
I don't see why it won't be catching up if it is updated to match what people are trying to do.
You can, legislators just have a number of strong incentives to do the exact opposite.
You can tell how delicate this state of affairs is for the wealthy by the fits that they pitch via the media whenever a legislator proposes closing one or more of these loopholes (e.g. carried interest).
Moreover, many loopholes are often opinion based and require the tacit acceptance of the IRS to continue. Change the IRS leadership and boost its funding and the house of cards would start to collapse.
The problems are that they tell us to be fatalistic about this and we believe them and corporate-friendly lobbyists have more cash than union friendly lobbyists.
Make it expensive to hold capital.
Capital in motion and at a high velocity is generally good for everyone. Capital at rest serves very few and is very harmful to everyone else.
This is dangerously wrong. No economist would tell you that a high velocity of money is an inherent good, or even that increasing the velocity of money is an unfettered good.
Public infrastructure, mortgages, venture capital, small business loans - all of these are investments, and making it more expensive to hold capital will dry up access to money for these sorts of projects.
You may be confusing money and capital. Money velocity is almost always good. If someone buys infrastructure bonds and then those proceeds are spent on contractors to build infrastructure (who in turn pay suppliers and employees) you have lots of money moving with velocity.
I am not confusing anything. Increasing the velocity of money is not always good. In fact, under some schools of thought, long-term increases in the velocity of money are neutral-to-slightly-bad.
> If someone buys infrastructure bonds
Increasing the expense of saving capital means increasing the expense of bonds, which decreases the incentive to buy them in the first place.
> you have lots of money moving with velocity.
Uh, no, the tail end of that process does describe consumption behavior, but this situation actually has very little to do with the velocity of money, since we haven't addressed the propensity to spend that money a second time within any finite timespan.
Your clarification is more in line with what I meant.
Public infrastructure is exactly that...public. It is isn't taxed.
More money would be available for loans with higher velocity. Venture capital already has extremely high velocity...that's why it is even possible for extreme high risk investing to be profitable in the first place.
Where the penalty would be applied to businesses, banks, investment firms sitting on CASH or near cash assets doing nothing. Put those assets to work or tax the hell out of it.
Past that, if it's expensive to hold money in America, they'll stop holding money in America, which means capital flight, which is its own very large problem worth avoiding.
The idea is to with as much force as can be brought to bear get money to move into investments that hire people instead of just accrue capital gains.
An investment that puts people to work and generates 10% is much better than an investment in a fund that generates 10% in cap gains. Same gain, vastly different outcomes.
1. For individuals, simple tax code which does not distinguish where your income came from, but does keep income brackets (not flat tax).
2. For businesses, distinguish between:
- "US-based" company which would pay 10% corporate tax. A US-based company would need to have at least 66% of employees based in the US and/or at least 50% of the products/services produced in the US.
- "international" company would pay 35% corporate tax, if they want to do business in the US.
Unfortunately, its never going to happen. It will be phone-book-sized for the foreseeable future.
Even loopholes which, by common sense, should be closed are fought against with ferocity. For example, the corporate jet loophole-- effectively a "gift" for millionaires and their corporations... https://qz.com/196369/why-buying-a-corporate-jet-pays-for-it...
There's a reason why things are the way they are. Redrawing the playing field is complicated and can't be done easily without (business) casualties.
The wealthy pay a decent amount for the resources of society they generally consume, which is fine.
Every loop closed makes tax evasion harder and riskier. There will always be people who do it, like there will always be people killing other people, but it is worth making it hard and risky enough that most people will consider other solutions before resorting to murder/tax evasion.
> What if you make the rules so simple that there are NO loopholes and there is no/little possibility for tax avoidance?
Then we could lower tax "rates", reduce dead weight loss, and increase tax receipts.
But no, we've decided, for example, that home ownership is important for everyone so we subsidize home ownership by letting people write off mortgage interest. This has the unintended effect of driving up prices for homes and encouraging people to buy more home than they need.
When taxes are too high, it causes pathological behavior.
Some people will, even if it nets them less after taxes, minimize taxes paid. "Tax shelters" in the 80's would be all but guaranteed to lose money, and yet people would still buy into them because they would reduce their taxes and pay huge fees based on the total taxes that would be reduced. These arrangements were legal (although the IRS was hawkish on them) but actually made no business sense for investors.
Eliminating the MID without eliminating the deductibility of commercial loans' interest makes commercial purchasing of real estate cheaper than private purchasing. IOW, eliminating the MID is a big handout to commercial landlords and serves to keep even more people renting rather than owning their housing.
Sounds fair. Can I also reduce my income by furnishing my building (home) with equipment (e.g. furniture and appliances) in the same way that commerce can? Would that make sense?
> Eliminating the MID without eliminating the deductibility of commercial loans' interest makes commercial purchasing of real estate cheaper than private purchasing. IOW, eliminating the MID is a big handout to commercial landlords and serves to keep even more people renting rather than owning their housing.
There's only so much housing stock. If more are renting, there's more business in renting, but that mostly affects the mid to upper classes. Do we really want to subsidize urban sprawl? Maybe we do. Maybe we should. Should we do it forever? I... don't like it.
Maybe all subsidies should have a phase-out/sunsetting period to avoid economic shocks while reducing the plethora of loop-holes and market distortions that they create.
I'm not following you here. Rental market dynamics affect the lower and middle classes and the rent/buy margin affects the middle class. If the gulf between renting and buying widens (by buying becoming relatively more expensive), how does that not help landlords (mostly upper-middle and upper class), who in turn achieve increased power over the poor and middle classes (vs the status quo)?
Every 750 credit score, 2 steady income, $100K household income family who doesn't buy a house but instead rents put pressure on someone worse off in the economic stack-rank.
The overall tax rate is too high (or it would be too expensive to lower the overall rate), so politicians give certain people sweetheart deals on certain things because they consider it relevant, thus offering someone, somewhere a tax break. Others are then free to use the same deduction for their benefit.
The wealthy aren't stupid. They're generally quite pragmatic and flexible when it comes to making money.
Loopholes:
- obfuscate the fact that "certain" people, who should be paying 35% are not, in fact, paying a penny.
- give incredible power to the people who decide what "certain" group to reward with them or threaten to withdraw them
No matter how you slice it, if government taxes "income", and your business is set up such that you decide what your "income" is, you can control how much tax you are bound to pay. The only way around it is to make people think that spending more money on more government is a good and sensible thing to do. Or perhaps that spending more money on higher employee payroll is a good and sensible thing to do.
Another is to tax things that are very hard to structure around. Taxing land, taxing stock sales (the SEC section 31 fee), taxing retail purchases, etc.
The problem is that changes also always affect some of the non-rich. You'll never manage to tailor laws so that everyone is hit exactly as desired.
Read: Arbitrary and capricious legislation what will be abused in creative ways. I'd prefer laws remain as objective as possible, and I'm a lot more concerned about bad legislation than 1%ers moving their money around.
You don't want the IRS dictating what they consider to be creative ways. The IRS can not agree with something you've done, but you don't want to end up in a situation where they effectively make the law. That makes no sense at all.
Claiming 'nothing has changed' in this regard is mostly true. There's some more red tape to get through but we're very clearly moving towards a Gilded-Age level of corruption and inequality in the US. Heck, we even put one of these 'enlightened' billionaires in as president!
Wish I had more to contribute to this conversation, but its pretty hopeless as the wealthy can simply propagandize people via their media sources to vote against their interests and can successfully lobby politicians to give them almost anything they want. Trust me, the Koch brothers aren't funding reason.com because they're academics, but because the libertarian philosophy it sells lines their pockets the most. I suspect this is the norm for later-stage capitalist economies that pride themselves on low regulations. High regulatory European economies seem to have a stronger firewall against this compared to the US. This isn't going away barring a massive economic change, perhaps when we can't continue to hide what automation and wealth hoarding are doing to working people. That could be anywhere between 10 and 100 years from now depending on how its handled.
I suspect deep automation will simply lend itself to a new economic and social reality. I just don't envy our kids and grandkids who will have this fight against the status quo. The 'enlightened' wealthy aren't going to concede on anything that affects wealth and status easily.
Spit balling here, but I'm not sure a wealth tax will fix it.
Another problem though is valuation of that asset. There will be huge incentives to show lower valuations, but that's already a case for things like real-estate property taxes, and somehow the system still works.
Look at it this way, I can either buy a bigger house with more debt whenever I have some extra money laying around, or I can save that cash and have the government take some of it every year. You also incent people to spend money on non-material things like travel and entertainment, rather than spending cash on a reasonable car (because leasing the car and blowing the other $20k in Vegas sounds like more fun).
There’s a simple maxim in taxes and economics - do not tax activities you want to encourage, and tax those which you want to curtail.
If you buys a bigger house, if equity portion of that house is above a taxable threshold -- say a $1M house, and you have $200K equity, then that equity will be taxed. Very minimally I might add.
> do not tax activities you want to encourage, and tax those which you want to curtail.
That's not working out currently. Unless you want to encourage massive wealth inequality.
We spend way too much effort designing these systems as all "stick" and no "carrot". There are much easier ways to incentivize the rich (and companies) for the behavior you want.
Why do you assume this user is in a "think tank"?
What's wrong with being financially successful, aside from the fact that you either aren't or are pandering to people who aren't?
This is not an honest argument.
The rich do pay some tax so it's not impossible to get them to pay and rich people in different countries pay different percentages of their overall wealth. So it's by no means impossible to make them pay more, if that is what society desires.
(With standard policy-based exemptions such as tbe rise in value one one's primary residence etc)
For example: If I go hunting under my couch cushions I might find $1.50 in change. By that logic of a progressive tax code if I do the same activity on Bill Gate's couch I should find 3 or 4 million dollars.
Obviously that's insane. I would argue that it's insane because on some level everyone looks at a million dollars and thinks "That's a lot of money".
On top of that anyone encountering the sticky end of a progressive tax code is always confronted with the calculation of the cost of avoidance vs. the cost of the tax. And there's always a price you can pay to avoid a tax. It's generally based on the price of lawyers and the price of politicians.
Which isn't to say a progressive tax code isn't a good thing. Frankly I'm all for it. But to be equally frank how we raise the money for Government in this country is over thought. An unfair tax code that raises a reasonable amount of money is loads better then a fair one that raises an unreasonable amount of money.
For instance, if someone says that alternative medicine fails for n different reasons, would you say that the person is committing Nirvana fallacy or that there is something to say about the fundamental failures of alternative medicine?
The qualitative fault I'm trying to point out is that trying to tax 'rich people' is a failed attempt because no matter how effective you can implement your tax measures, at the end of the day people can move to other countries and your own country starts to suffer more than it benefits from the increased taxes.
It is a Nirvana fallacy if someone says "No matter how hard you try to curb murders, serial killers always keep finding new ways to commit crime", because at the end of the day, if all the serial killers move out of your country to a more serial killer friendly country, you don't actually suffer, you did your job.
On the other hand, in terms of taxes, you don't want your tax paying population to move out or be rendered incapable of producing wealth. That kind of 'equality' is not worth it.
> The qualitative fault I'm trying to point out is that trying to tax 'rich people' is a failed attempt because no matter how effective you can implement your tax measures, at the end of the day people can move to other countries and your own country starts to suffer more than it benefits from the increased taxes.
That's more of an argument against taxes in general, isn't it? You tax people high enough and they'll leave. There's a certain "sweet spot" at which you tax people just enough to provide good services without making people leave. I wouldn't dispute that. But for that to be a valid argument in this case, you'd have to provide evidence to show that closing these loop holes puts the tax burden of people above that "sweet spot."
The first half of this--that rich people can move to other countries if they think they are being taxed too much--is certainly true, but I have doubts about the second half.
There are people who have as part of their drive a desire to see humanity as a whole better off than we were before, and there are people whose primary drive is "eff you, I got mine." That's the kind of rich person who will be the first to abandon a high-tax country in droves, and in my opinion we are better off without them: they are the profiteers who make life for those working under them hellish, who feel no responsibility for polluting and underpaying and ignoring externalities and racing to the bottom. What we want, who we should hope to see become successful, are principled people who understand that the riches which come their way are only possible within the context of a healthy society, and who are willing to part with a larger share of their fantastic revenues to ensure its continued improvement (while of course still being able to enjoy the fruits of their labor).
To argue otherwise, as it looks to me at least, is to argue that (1) the only way to make a lot of money is to be selfish and unethical, and (2) we still need that money in taxes (at a lower tax rate) to maintain a healthy society. I am sure I'm simplifying things.
I hope more people will research Georgism and start trying to spread the idea around. It's the only tax-system that comes anywhere close to closing up any of these loopholes.
It's also been humbling. When I was just an employee, I used to wonder why taxes couldn't just be a simple linear function of income. These days, I have a much greater appreciation for the complexities involved in designing taxes such that they maximize income for the state (local or otherwise) while still being a fair system by some measure, possibly determined by ballot boxes every four years or so.
Especially that they can use their wealth to hire teams of world-class specialists and pay them to figure out creative loopholes. It's something regular people can't do.
It sure looks promising. But still wondering if it has been applied in practice.
Tax stocks steeper and someone wealthy enough will create the same investment exposure in the futures market, where every trade gets a mixed lower capital gains rate automatically!
Make cash transaction reporting requirements over $10,000 for everything, and someone wealthy enough will get real estate totally exempt from it!
Get an APA or a private ruling from the IRS where they agree on all the ways you aren't going to pay them!
Tell everyone else this is a problem so you can write a law with a new tax change that really only benefits you and your friends, because all the constituents you pander to have a base of voters that only somewhat understands income tax!
Squad goals!
The reality is that people will calculate risk/reward based on the situations that they face. Tax enforcement is a pretty simple concept. You don't invest $1 in enforcement to net $1 in compelled compliance, you use enforcement to net $100 in voluntary compliance. Tax authorities can and do calculate how much they can harvest from enforcement activity.
Enforcement increases both the risk and impact when people do that risk calculation. If doing some shady bullshit to re-swizzle income has a X% risk of costing me $Y or Z months of bureaucratic torture, it's going to impact my decision process.
US Federal tax enforcement is a joke today. Through de-funding and neglect, the ability of the tax authorities at the Federal level to perform even basic enforcement activity has been kneecapped. To give a anecdotal illustration of the current situation, a friend of mine is a now-retired tax enforcement person. His particular speciality was staffed with as many as 75-100 people nationwide in the early 90s... when he retired earlier this year there were two other people in that function and most prosecutions in his speciality were being abandoned as no Federal people exist to testify at trial!
This doesn't mean that the wealthy have no more places to hide their money, but it does make it much more difficult for them, and is a sign of progress.
It would also be nice to see something for independent contractors and smaller businesses.
Should we really be taxing a mom and pop shop at the same top marginal rate as a large corporation?
In a world where food is abundant (for now) that's what keeps everyone else poor. Limit their ability to become greedy landlords and they'll be forced to invest in real businesses and take risks.
This can be started on a local level and enforced easily by only allowing people who live in the homes or community trusts or government to own them.
If some billionaire owns 10 ferraris, has millions in offshore accounts and a super yacht why should anyone else care? It's not taking away from anyone and creates demand for luxuries that wouldn't otherwise exist and create jobs.
The article fails to mention that even when the tax code was 90% on the highest earners, most of the successful companies were American, including Exxon Mobil, GM, Ford, DuPont, AT&T...
Anecdotally, I don't think I have ever met anyone starting a business thinking "If I don't make more than 2 million a year for myself, I won't have a successful business." So increasing tax rate beyond a couple of millions a year, or even before, seems a no-brainer to me, at least until everybody gets healthcare and free education.
For an individual to make $2 million a year for himself at a 90% tax rate, he would have to own 100% of a company generating $20 million in profit.
Assuming the same individual's skills were worth $200k/yr in market salary, you would be suggesting that the individual must have had a greater than 10% chance of growing a $20 million profit business to achieve an expected value of $200k/yr in compensation. You would be wrong.
However, if the individual only had to generate $2.5 million a year in profit through their business to take home $2 million a year, that 10% success rate is more realistic.
I find progressive tax something really nice, since it helps you get started, and is a fair way for everyone to give back when they're super successful (e.g. healthcare, education). You state this is a cancer, but why?
How much money do you think that will take? I'm willing to bet your estimate is too low by a factor of 100. I've known multiple family friends who have easily used $500k+ a piece in government healthcare.
Most developed countries pay $3,000 to $4,000 per capita, according to Wikipedia. US pays about $7,400 per capita. So that would be the costs I guess. Beware there are more "capita" than taxpayers, and that all taxes are not paid through income taxes.
Hopefully we can find ideas from other countries to pay less than current prices.
https://en.wikipedia.org/wiki/Health_system#International_co...
That's one reason I suppose but it's important to note that despite large differences in top marginal tax rates, the percentage of tax revenue as a percentage of GDP has stayed remarkably stable since the 40s. So perhaps something else is going on.
[0] https://upload.wikimedia.org/wikipedia/commons/7/75/U.S._Fed...
GE has 330,000 employees.
If Immelt decided to take $0 and share his income equally with the remaining GE employees, he'd increase each worker's income by $53.77 per year. That's not going to do much to close either the wealth or income gaps.
Part of what we are seeing is simply that corporations are getting so much larger than they've ever been in history. Therefore, the pay granted to the CEO is for he or she to oversee larger and larger groups of people.
http://247wallst.com/investing/2010/09/21/americas-biggest-c...
McMillon's total pay is $19,800,000.
Per employee, that's $9.
I'm not convinced that the income/wealth gap itself is 'the problem'. Therefore, taxing the wealthy at a greater level will not be 'the fix'.
What we want is for lower and middle income families to have more disposable income, less financial stress, and overall better quality of life. I believe that the most potent knob to affect that is the number of jobs available. Increasing the number of jobs increases the demand for workers. Increasing demand for workers increases the average pay. We can talk about the quality of the jobs as well, but I believe the primary influence from a macro-economic view is the number of jobs.
US unemployment is at a 10 year low[0]. So we should see pay (and inflation) creeping up over the next few years, barring some unforeseen economic disaster, and the lower and middle class will benefit.
[0] https://data.bls.gov/timeseries/LNS14000000
* One illustration that keeps coming to mind: Two investors invest in the same instrument. That instrument returns 10% per year. They hold the investment for 5 years.
Investor A invests $10,000 Investor B invests $100,000.
At time 0 the 'wealth gap' is $90,000. At 5 years, A's investment is worth $16,100 and B's is worth $161,000. The wealth gap has grown to $145,000. It seems to me that people are making the observation that this gap is increasing, and it is, but in reality, it's a natural manifestation of capitalist economies. We've been in a bull market for 7 years, it's borderline unprecedented, and one observable effect is that the gap in absolute $ between rich and poor is increasing.
Not entirely on topic, but it's important food for thought.
If we're talking about a class of people who don't enjoy their work and won't keep at it without outsized financial incentives, I really don't think we're describing visionaries that we depend on for realizing our potential as a species. I'm 100% ok if hedge fund managers who underperform the market anyway decide to close up shop and sip pina coladas all day.
>The business leaders who really matter are motivated by their passion and curiosity, shaping their legacy, changing the world, etc.
I agree though. Most laborers work 10x harder than I do. I'm just rewarded from having some obscure knowledge. I do not necessarily agree that we should be going after individuals though. I think corporations are the correct target.
Furthermore, yes, tax rates are lower today if you exclude Social Security and OASDI[0], but tax revenue as a percentage of national income is higher. That's a sign that the higher tax rates did actually suppress economic activity, and that both the government and its citizens are actually better off with tax rates closer to what they are today than what they were 50-70 years ago.
[0] SS/OASDI tax rates have increased sevenfold since they were introduced in the late 1930s
An interesting anecdote on this is in the origin of American private health insurance. It came about from war-era wage freezes. Companies wanted to differentiate, were barred from doing so with price, and so shifted to benefits [1].
[1] https://en.wikipedia.org/wiki/Health_insurance_in_the_United...
I don't think a 0.363% increase in the R&D budget would make much of a difference.
If you have ambitions for financial success, learn a skill that is in high demand or find another way to create value for society.
If you have no ambitions for financial success, you have no right to go around complaining about the success of others.
Stop fetishizing successful people who deprecate their success. Some, like Warren Buffet, are disingenuous and fairly transparent panderers. Others, like George Romney here, may well be sincere. But they achieved success by creating value and making careful and studied decisions about the allocation of capital.
> Quite often in the pursuit of more wealth, they trample on the little guys, leaving them to struggle more.
Show evidence.
> Or through fraud, graft, and knowing who to bribe (see "campaign finance").
Show evidence. Not baseless allegations.
Or through fraud, graft, and knowing who to bribe (see "campaign finance").
The economy is not a zero sum game.
Earned? My ass.
A fortune amassed from profits skimmed off of HFT isn't earned and produces nothing of value.
To cite the article, in the 50s and 60s, CEOs earned on average 20 times the average workers' salary; this is now 247 times the average workers' salary.
Also - What makes you think poor people will make such practical spending decisions? I hardly believe they will buy insurance. More likely to buy nicer food/dining out/entertainment and nicer cars/clothes/signals of wealth. Again, this materializes mostly as profit in companies owned by the rich.
I am pretty sure it will have an effect on food prices. Though, probably not as much as on housing.
If you truly wanted the "revolution" to be fair, then all the money would go to third world countries and you'd be left with $3000. But nope, you actually want to be allowed to steal from the rich so you can live an American middle class life without having to work.
If your using money to keep score your probably using the wrong system to keep score.
I've been using weight watchers lately and keep score with the right system helps a lot.
I think another side of the problem is 99% of people who are not rich are using the same score and since they are "losing" they hate the rich. If we all stop using money as the score we'd all be better off.
Most people have a tiny amount of savings, and are struggling to get by.
https://www.forbes.com/sites/karstenstrauss/2017/02/08/the-5...
I think unfortunately for most people their expenditures rise with their income and they struggle to get ahead. I'm not saying striving to get ahead is wrong, I'm just saying some people end up treading water no matter where they are.
WSJ has definitely tried to answer "how much is enough" and googling for that returns things like
https://www.wsj.com/articles/can-money-buy-happiness-heres-w... >What matters a lot more than a big income is how people spend it.
And
https://blogs.wsj.com/wealth/2010/09/07/the-perfect-salary-f... >The Perfect Salary for Happiness: $75,000
I'm not sure there's really one answer.
So yes, there's all of that. But as i started with I am happier due to having more money. There are all sorts of things I'm able to just do without thinking about it now, things where I'd previously need to consider "if I do X I wont be able to do Y next week". I don't have to trade a retirement savings for a comfortable lifestyle. I'm able to afford more and better leisure activities. And then, to tie it back to your side, I go visit my friends who make twice as much as I do and I realize how much better off I could be.
That and confirming the aspect the person I was replying to had mentioned where as income increases one tends to change the goalposts.
At the end of the day I think we need to spend more time sharing a little more. ME included.
How is 90% taxation "sharing", sounds more like "give me all your money or you go to jail", followed by "now I get to spend it however I want". Show me the huge/efficient benefits that have been gained by the huge government expenditures. We're $20T in the hole, has it really benefited people that much.
Real wages stagnant for 20 years, household debt at all-time-high, costs at all time high. If you're going to be "robin hood", at least demonstrate that its helping (seems more like US politicians giving it all to their band of merry men).
"Poor children more generous than their rich counterparts, study finds" http://www.telegraph.co.uk/news/science/science-news/1164877...
"Why the Rich Don't Give to Charity" https://www.theatlantic.com/magazine/archive/2013/04/why-the...
"Study: Poor Are More Charitable Than The Wealthy" http://www.npr.org/templates/story/story.php?storyId=1290682...