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Comment by callmeed | Hacker News Reader

I know this is wealth and not income, but I get sick of the media (and politicians) using the "top 1%" or "top 5%" label.

When it comes to income, the top 1% includes an attorney making $250K and a hedge fund manager making $10M. I imagine its similar for wealth. My guess is that distribution curves spike somewhere past the 1% mark.

Maybe I'm biased because I barely make the cut and don't want to pay more taxes, but it seems odd to use such an arbitrary cutoff for reporting and (especially) policy decisions.

And please tell me if I'm wrong or off here–I'm geniunely interested in this.

EDIT: downvoted? Seriously?

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I think one of the problems of wealth distribution and attitudes about it in the U.S. is that it does shoot up so rapidly in the upper 1%. We're a very upward-looking society so it's easy for someone making $250K a year to say "I'm not rich, I still have a mortgage, I have to work for a living I can't just spend whatever I want, whenever I want -- I know there are people further up the latter than me who have so much more money, I must be middle class."

Absolute percentiles are useful because they do show you where you stand in relation to the rest of society. Families making $250K may not be Scrooge McDuck-style super-rich, but they're indisputably in the top few percent of the nation in terms of income. It's hard for those folks to claim to be middle class when 90+ percent of their fellow citizens make less.

It's also worth noting that people's lifestyles and "necessities" expand to fit their income, particularly if their income goes up relatively gradually. I've literally heard people say, "Well, I make $400K a year but I'm not rich because it costs a lot of money to pay mortgage and taxes in Westchester County and send my kids to private school and drive a nice car." They think that "rich" means "disposable income I can spend a whim," when in fact living in Westchester and sending the kids to private school is part of being rich.

I should add that I'm not definitely not exempting myself from this set of attitudes. When I was in grad school in my early 20s (in the mid-late '90s, so it's not like inflation makes a huge difference here) I made less than $17K a year for several years, but I never felt particularly deprived and don't particularly recall not doing things I wanted to do because of money worries. Now my wife and I make more than $100K combined (putting us in the top 25 percent of US workers) and yet we are constantly bumping up against the limits of our income, particularly because we enjoy travelling. I don't feel rich but I know I'm better off than a significant majority of Americans.

If you only barely make the cut, you'll only be paying barely more in taxes. Only your income above the cut is taxed at the higher rate. It's not like if you make $239,999 and you get one more dollar in income you lose money. Only that dollar is taxed at the higher rate.

This isn't something that's communicated very well in our society. I didn't realize it until I actually did the math on the tax tables.

It's not about being communicated imo, it's about most people not being numerically literate enough to be able to understand (not saying you aren't, just in general). I'm convinced that more than half of the population simply isn't capable of truly understanding progressive taxation, just like they cannot comprehend time value of money or similar things. When you spell it out on a sheet of paper most people will say 'oh yeah', but they cannot really internalize it, and never will.

Of course this is a problem, because how can you expect people to abide by law they cannot understand? Worse, how can you communicate to people that they're incapable of understanding without being (or even just 'coming across as') condescending? I don't know, I don't have an answer. But when people like this: http://www.nytimes.com/2009/05/03/magazine/03european-t.html... show being absolutely oblivious to the mechanism (people who are for the rest presumably quite intelligent, and who - professionally - spend quite a bit of time on a piece like this), how can we expect the average citizen to really understand?

I guess it's a recent problem too - just 50 years ago people just listened to their banker about financial things and their doctor on medical things, and believed whatever they said, but we've long passed that point.

Yes, once I thought about it I had a greater appreciation for the "This isn't class warfare, it's math" Obama quote that's being tossed around.

It really blows my mind how many people don't understand our progressive tax system. Especially someone making 250k+...

Income distribution is relatively uniform - there are no "spikes" - but it is uniform according to a power law distribution[1][2]. Due to the uniformity practically every division could be called "arbitrary."

[1]http://en.wikipedia.org/wiki/Pareto_distribution [2]Unless you look at the bottom end where you may find welfare trap effects http://en.wikipedia.org/wiki/Welfare_trap

Although income (and wealth) distributions are pretty smooth in dollar terms, there's an extreme social stratification somewhere in the the top 1%. The lower half of the top 1% consists of doctors, lawyers, managers, and successful small business owners. The upper half (or upper .1%, or upper .01%) form a very different group.

http://news.ycombinator.com/item?id=2844059

If you barely make the cut you would only be paying taxes on a very small portion of your entire income.

top 5% you are earning more than 95% of society... you are rich (relative to the rest of society). Stop complaining, and pay more taxes.

I initially dismissed your comment, but I think I'll counter it instead and see if you have any actual reasoning behind it.

I don't disagree with your first 2 statements. Here's my beef with "pay more taxes":

- The top 5% of earners already pay 53% of the nation's income tax revenue. The top 1% pay 33% of it. Exactly how much would you like it to be?

- Those in the top 5% are in a higher tax bracket already (usually 33 or 35%).

- 40-50% of americans pay no federal income tax (only payroll tax) and 10% receive more cash from the IRS than they contribute in federal income taxes and payroll taxes.

So, please, tell me what those in the top 1%/5% should be paying?

I am going to argue for as a straw man...

If you believe theologically, ideologically, or otherwise that "all men (and women!) are created equal" then it follows they should pay equally. I would argue equally means normalizing their income against their position on the income scale so the taxes "hurt" them the same as it they "hurt" everyone else.

It is well known that 10% of the income of someone below the poverty line is a serious hardship, but 10% in the top 1% of earners is not (although it still hurts). If you normalize the taxes based on the income distribution you can cause the amount of economic "hurt" to be equalized across society. This means that the top %1 will pay much more in taxes than perhaps the bottom 90% or even 95%. However, the "hurt" they endure will be equal.

First, I'm doubtful that a family at the poverty line ($22K for a family of 4) pays 10% in income tax. I could be wrong, however.

>> If you believe theologically, ideologically, or otherwise that "all men (and women!) are created equal" then it follows they should pay equally.

On this, I'm not sure how you can come to that conclusion. I'm assuming (possibly wrongly) that you're referring to the DOI, which states:

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

This seems to refer to equal starting points, equal liberties, and equal opportunities–not equal amounts of wealth or income throughout life. I think "pursuit" is a key word here. We should all be free to pursue what makes us happy, but there are no rights or guarantees that we will get it.

> This seems to refer to equal starting points, equal liberties, and equal opportunities

So you are saying all americans have equal starting points/liberties/opportunities?

No, I'm saying that's the spirit of that sentence as I interpret it. Based on that I don't think you can conclude everyone deserves equal wealth.

No, you misunderstand the 'created equally' argument. It doesn't mean everybody should get the same, it means that no legislation should discriminate between people. More technically, the 'created equally' refers to negative liberties and negative rights, not to somebody else's obligation to do something to create an artificial equality.

(note that this is not a matter of argument - this is quite clearly settled. Of course you could question if it should be like this, and if we shouldn't change the meaning of 'equal' into more positive rights ('affirmative action' etc); I'm not so much interested in debating that. I'm just pointing out that for broadly-accepted definitions of the terms you use, your argument is flawed).

What you miss is that income taxes are a small fraction of the total for the non-rich, and almost everything for the rich. Total taxes as a fraction of income are fairly flat by quintile, dropping for the very rich (multi-millionaires and billionaires, who pay lawyers and acocunts to have income transmuted into capital gains, taxed at 15%). http://www.ctj.org/pdf/taxday2010.pdf

You miss this point because the mendacity is useful to the very rich, who pay their henchmen in Congress and the Murdoch media companies to repeat it endlessly.

The top earners pay the majority because they're earning the vast vast majority of money and are increasing that majority share at a rapidly increasing rate. It's common sense that pretty much how ever you tax it, whoever controls 80% or more of the wealth will end up bearing the brunt of taxes as well.

Add the fact that most of the whales out there pay a much lower marginal rate than you or I makes it all the more impressive that they carry so much of the load. It's a stark sign of the disparity.

I'll take the slightly more extreme point of view (that will probably be shot down as "pinko-commie bullshit")

You should pay as much tax as is required to lift the rest of society to (or close to) your level (of lifestyle/income etc). (obviously "your level" will decrease as you pay more tax).

That's the IDEAL it is of course highly impractical. Most ideals are. :(

Just because you got given awesome opportunities (good school, good family, good race, good society, whatever) and even if you worked really hard, doesn't mean you deserve to hold disproportionate amounts of wealth compared to those that didn't get those things.

I'm actually with you more than you'd think ... but here's where I get hung up ...

I have a friend who is roughly the same age as me, same race (white), parents were the same class, and we grew up < 3 miles from each other. Yet he is the laziest eff'ing slob I know. His wife works part-time, he collects unemployment and makes no attempt to train or find a job. They live in subsidized housing and make ends meet via welfare and taking advantage of others' charity.

I'm curious how you argue that all of society (including people like this) should have their lifestyle increase in perpetuity.

I (being optimistic) would like to believe most people want to be productive. So as long as you make it 'easy' to be productive, then the problem should be minimal.

You can always find fringe cases where people are undeserving and insulting to a particular system. But the system shouldn't be defined by the few.

For every one person you find, who is a lazy slob, I bet I can find three people who want to work, want to make something of it but just don't have the means to get out of the rut they are in. (presumptuous I know, and I can't really back this up, but I'd like to believe it is true).

So basically you are basing your proposition of robbing the people who have made wealth for themselves on your really wanting to believe that most people would want to be productive? Isn't that, how shall I say it, rather strange? Because for your assertion that those who want to be productive outnumber slobs 3:1, I'll posit the exact opposite.

> ...robbing the people who have made the wealth wealth for themselves...

How about I flip that then, the wealthy robbed the people to generate their wealth, and then complain when they have to give (some of) it back.

It is very rare to find a company that isn't exploiting someone along the chain in order to generate that wealth. Of course capitalism renames it to "surplus value", but it is in fact exploitation (people being paid less than the value they add).

Do you really think an individual is responsible for all wealth they generate? So, if Steve Jobs was born in china, and lived through the cultural revolution, he would have still built Apple (or equivalent) and been the success he is today. Because society and the services around him had nothing to do with his success?

People don't generate wealth for themselves, they capitalise on opportunities provided to them. The U.S provided a lot of opportunities to a minority of people, who then capitalised on it. But their wealth wouldn't exist without the opportunities being available and thus they should pay tax (proportional to the amount of wealth they have generated) so that the U.S (government) can provide more opportunities to more people.

It's not a perfect system, but I'd rather subsidize a few bums like your friend and also subsidize people who really do need welfare / disability / unemployment.

The good news for is that a standout non-lazy person will raise much more revenue than a stand-out leach will be able to take.

Upvoted. I disagree with your perspective, but your comments are entirely relevant and appropriate.

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