The Great Switch by the Super Rich | Hacker News Reader

The Great Switch by the Super Rich

robertreich.org

40 pointsstcredzero18 comments

Has the percentage of the government's revenue that comes from the rich changed in the period he talks about? That would seem to be the most important statistic, and yet he doesn't include it.

Yes, it has, and it has increased. This article is either terribly disingenuous or merely ignorant.

I would argue it hasn't increased nearly enough in proportion to the benefits rich people get from our now heavily inflationary monetary system. In other words, turning on the printing presses is a boon for the wealthy (cheap money to fuel stock market (mal)investment, govt. spending on things like war, appreciation of assets, etc.), but it's a hidden tax on the poor. Then, the rich whose income has risen over the last several years while all incomes below have flat lined (or even dropped) balk at the prospect of higher taxes while our crippling debt now elicits unthinkable political talk of U.S. govt. default.

Edit: I would appreciate a response rather than a downvote. I don't mind disagreement, but at least give me the chance to address it.

Not sure I understand were you're coming from. I'm sure you can find more complex arguments either way but as I understand it the basic effect of printing money is devaluing that existing money - a tax on anyone holding the currency.

Wouldn't the rich be the ones holding a disproportionate amount of cash?

Yes, the rich certainly do hold a disproportionate amount of cash, but they don't just stick it all in a simple savings account (often the only option for the poor). The rich put their money to work (in money markets, the stock market, property and investments abroad as the article mentions, etc.) so that it earns a return. And they often buy items before the effects of inflation set in.

<Not questioning your claim> Can you link to the source? </not questioning your claim>

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...

Over the last 30 years the amount of federal tax revenues from the top income quintile has increased substantially while the amount contributed by all other quintiles has fallen. Today the top quintile contributes 2.2x as much tax revenue as all other quintiles combined. And the top 1% contributes nearly as much taxes as the bottom 80%.

I'd love to see the plot of percentage of income vs percentage of taxes paid over time for each quintile.

If the top quintile grew the percentage of income more than 2.2X over the same time period, that quintile is paying proportionally less while paying a higher share.

Any links for percentage of income by quintile? (not wealth, income)

the amount of federal tax revenues from the top income quintile has increased substantially

Yes, but that chart doesn't say anything about the number of rich people over that range of years. I expect a lot more millionaires exist today than in 1979.

However, the historical top tax rate has decreased from 70% to 35% over the period from 1979 to present (http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...).

I'm not sure I understand your point. The data is normalized to population, it's in quintiles and percentiles. It doesn't matter how many millionaires there are, the top 1% is still the top 1%. What is your contention exactly? That there is some sort of ultra-rich top 0.1% or 0.01% who are shirking their tax liability and leaving the rest of the top 1% to carry it? Or that the top 1% is not large enough of a grouping of high-income folks and that somehow they're paying too much and the top 5% or so should be paying more?

Regardless of the tax rate the actual tax revenues from the top 20, 10, and 1% has increased substantially in the last several decades, to the degree such that only 40% of households are contributing fully 85% of federal tax revenues today.

You're right about the data being normalized, so it doesn't matter how many millionaires there are, and the top 1% is still the top 1%. However, that top 1% can be a richer 1%. Take this from the article:

In the late 1970s, the top 1 percent took home 9 percent of total national income. Now the top 1 percent’s take is more than 20 percent.

The chart you referenced shows tax revenues on the top 1% roughly doubled for the time period from 1979 to 2007, but over that approximate time period so did the total percent of the national income going to the top 1%! That would appear to explain much, if not all, of the increase right there. One wouldn't be able to take home double the income yet pay the same in taxes without serious loopholes.

In absolute terms? Real terms? Relative terms (i.e. per capita and/or share of wealth)? and others have said; source?

Lots of variables in that statement (the number of people in the "rich" % bracket, do we take into account taxation method or inflation changes to the value of money, etc.)

His point is less about the government taxation, and more the concentration of capital into a very small, very monetarily powerful group of people as a consequence of the tax system.

http://lanekenworthy.net/2008/01/14/taxes-at-the-top/

Doesn't look like anything to me. This shows the tax rates: http://www.truthandpolitics.org/top-rates.php. They climbed up for WW1 & WW2, and now are falling back to historical levels.

And here is income distribution: http://en.wikipedia.org/wiki/File:United_States_Income_Distr...

which again, shows nothing sinister. Where one man made $2 to anothers $1, now that man is making $200 to the others $100.

Also can anyone substantiate the claim that the super rich lend the government money? As far as I knew only the Federal Reserve lent money to the government.

Looking at the top rates, without taking deductions into account, is pretty useless.

But it was during the period of WWI and WWII that America became a super power. The syphoning of wealth from the general populace will ensure that America will no longer be a super power any more given a generation or so. America is repeating the economic history of a number of past empires; once the overall growth goes the rich try to take a bigger slice to keep their relative growth up, which leads to collapse. The transition of wealth to other countries like China has already begun.

If you have a look at the graph you'll see that in the 40' the top 95% was approximately 4 times the 20% line, by the end of the graph that is approximately 8x, so the ratio doesn't hold at all. Have a look at http://en.wikipedia.org/wiki/Gini_coefficient and you'll see that the Gini index in the US has been steadily increasing, boiling frog style, since the 80's. I wouldn't be surprised if the US's Gini index was worse than Mexico by these days (i.e. the US has a bigger problem with the _relatively_ poor than Mexico).

If you look at the colour coded map of the world you'll see that Europe's socialist states, basically all of them, have less of a problem with the relative poor.

A more useful graph of income distribution would be inflation adjusted - this graph might be useful in that regard (shows the larger overall take of total income by the extremely wealthy):

http://en.wikipedia.org/wiki/File:Share_top_1%25.jpg

Regarding the lending question - the wealthy lend through buying government securities, in the same way that any fixed financial instrument works - you give someone X dollars, you expect X+% back.

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