By Edward
I feel like such a fool. I mean, here there’s been a war raging and I didn’t truly realize it. Oh, I heard the folks insisting we’re at war, practically pleading with me to understand what’s at stake and why we must unite in the fight, but I chose to ignore the signs, preferring my haze of denial to the harsh light of hard choices. Clearly now, though, it’s impossible to deny what’s undeniable: we are at war.
What makes it all the worse, is that all through the 2004 presidential campaign, we were repeatedly told we’re at war. One candidate stood above the rest, going to great lengths to try and rally all sides across the nation around the cause, just to be scoffed at by his critics. That candidate, of course, was John Edwards, and the war that’s raging is a class war of epic proportions. The joke is, not only are the middle classes enabling the superwealthy to shock and awe the hell out of them, even the merely wealthy are voting against their own interests, and in doing so ensuring a new oligarchy rises to untouchable heights unimagined in any other time in the life of the American Dream:
Draw a line under the top 0.1 percent of income earners – the top one-thousandth. Above that line are about 145,000 taxpayers, each with at least $1.6 million in income and often much more.
The average income for the top 0.1 percent was $3 million in 2002, the latest year for which averages are available. That number is two and a half times the $1.2 million, adjusted for inflation, that group reported in 1980. No other income group rose nearly as fast.
The share of the nation’s income earned by those in this uppermost category has more than doubled since 1980, to 7.4 percent in 2002. The share of income earned by the rest of the top 10 percent rose far less, and the share earned by the bottom 90 percent fell.
The arms dealers, so to speak, in this war—the corrupt greasy middlemen lining their pockets via the misery of others—are our whorish Congress critters and President. From the immorally structured tax cuts, to the wholly obscene new bankruptcy law, to the repeal of the estate tax, to the restructuring of college assistance grants, to the cripplingly greedy credit card laws, to the relentlessly pro-corporate staffing of every branch of government, we non-superrich Americans have been insanely outmaneuvered. The playing field is now so hopelessly slanted against us, we’ll never catch up. And if you think that doesn’t mean you, you’re not paying attention. As The New York Times editorial notes today:
[M]any families making between $100,000 and $200,000 are not exactly on easy street. They don’t face choices anywhere near as stark as those encountered further down the income ladder, but they face serious tradeoffs not experienced by the uppermost crust, particularly when hit with the triple whammy of college for the children, care for aging parents and preparing for their own retirement.
There is something deeply wrong about a system that calls into question a comfortable retirement or a top-notch education for people who have broken into the top 20 percent of income earners. It starts to seem politically explosive when you consider that in a decade, those making between $100,000 and $200,000 will pay about five to nine percentage points more of their income in federal taxes than those making more than $1 million, assuming the Bush tax cuts are made permanent.
Still not convinced? Consider this:
Under the Bush tax cuts, the 400 taxpayers with the highest incomes – a minimum of $87 million in 2000, the last year for which the government will release such data – now pay income, Medicare and Social Security taxes amounting to virtually the same percentage of their incomes as people making $50,000 to $75,000. Those earning more than $10 million a year now pay a lesser share of their income in these taxes than those making $100,000 to $200,000. The alternative minimum tax, created 36 years ago to make sure the very richest paid taxes, takes back a growing share of the tax cuts over time from the majority of families earning $75,000 to $1 million – thousands and even tens of thousands of dollars annually. Far fewer of the very wealthiest will be affected by this tax. [This] analysis examined only income reported on tax returns. The Treasury Department says that the very wealthiest find ways, legal and illegal, to shelter a lot of income from taxes. So the gap between the very richest and everyone else is almost certainly much larger.
In short, we simply cannot afford to let Bush’s tax cuts continue. We cannot continue to structure things so that corporations get everything they need handed to them on silver platters while taxpayers can work their asses off and still not get ahead. Not if we want to maintain the social mobility that made this country the land of opportunity it is (or at least was). More to chew on:
From 1950 to 1970…for every additional dollar earned by the bottom 90 percent, those in the top 0.01 percent earned an additional $162, according to the Times analysis. From 1990 to 2002, for every extra dollar earned by those in the bottom 90 percent, each taxpayer at the top brought in an extra $18,000.
[…] The Bush administration says that the tax cuts have actually made the income tax system more progressive, shifting the burden slightly more to those with higher incomes. Still, an Internal Revenue Service study found that the only taxpayers whose share of taxes declined in 2001 and 2002 were those in the top 0.1 percent.
I’ve always been baffled by the way middle class and even working class Americans will vote for politicians whose agenda is geared toward benefiting the wealthy more than the nonwealthy. Voting against their own interests, essentially…why do they do that? In an earlier era, when it was feasible that those poorer Americans could fulfill their own rags to riches fantasy, it might have made sense…voting for the laws you want to be in place when you get your piece of the pie. But now that earning $200,000 a year does not grant you security? Now that the system is clearly designed to continue to widen the gap, not lessen it, why are average Americans still playing along? Why don’t they realize they’re under attack?
Good post, and the simple fact that he saw and could describe this in terms which brought it home to the general public is a large element of why I supported Edwards last year in the primaries.
I voted for Edwards in the primaries too Dantheman…pity he didn’t get the nomination. Let’s hope his message catches fire this next time.
It’s the great delusion of Americans that they are better than others and will be able to benefit from the unfairness of the system. Some of the loudest protesters against a good social safety net are folks who claim to be Christian, and appear to believe that they can only do charity by themselves, that somehow allowing all to benefit from a strong safety net supported by government isn’t sufficiently good. Now, it might appear that these people are just hiding their prejudices against the poor and minorities, but that cannot be, can it? They will repeatedly tell you that they are Christians and ask you if you have been saved.
Avarice couched in the terms of religion is pretty sad, but it seems to be very American.
Edward,
Yes, but at least your vote for Edwards occurred when he still had an active candidacy. Pennsylvania’s primary didn’t occur until mid-April, when the nomination was all but decided.
I hope Edwards catches on next time. I think he could be a uniting figure at a time we certainly need one.
You’ve got this double-posted, Edward.
Thanks Slarti…stupid typepad…
I’m doing pretty well for myself right now,
Pulling down about eighty thou
My wife makes forty — she’s a Vassar grad
And hey, for a woman that’s not half bad.
So we’re talking six figures here,
But there’s one thing I want to make crystal clear:
I have to laugh and I have to scoff
When I hear people calling us well-off.
Anyone who thinks that we’re sitting pretty
Doesn’t know what it’s like in the big, bad city.
Classical Rap, by Peter Schickele, 1990
Well, it used to be funny.
Voting against their own interests, essentially…why do they do that?
You know the answer to this question as well as I do – because money is not the only “interest” that motivates people. I, for one, am happy that I live in a country where economic interest is not the only governing political factor, even if it doesn’t always make the elections come out the way I would like.
Lottery mentality. Better the possibility, however slim, of becoming rich than the security of remaining middle-class.
The tax system, since JFK, has been designed to reward risk more than work. (If anyone wishes to advance the proposition that the top 0.1% simply works harder than the remaining 99.9%, feel free). Work, in the 50s and 60s, was rewarded primarily thru benefits and security, somewhat promulgated in the tax system. In more ways than one, risky investments in venture capital were taxed highly for the successful. Corporations amd management now, due to the tax structure, are encouraged to gamble their capital seeking quick large RIO.
Somehow the not ridiculous idea that someone making $100k would be discouraged from working by high marginal rates has been extended to believing that Bill Gates and Warren Buffett will go fishing if their 7th of 10 billion a year is highly taxed.
Answer: no corporate taxes, no capital gains taxes, top marginal tax rates approaching 100%. The ultra-rich will re-invest their income, the upper-middle class will seek secure income-producing investments rather than quick returns, and the rest of us will have security, income, and less pressure to act like entrepeneurs. Middle-management and skilled experienced workers might actually spend their lives at a single company, increasing efficiency by decreasing turnover.
Somehow the not ridiculous idea that someone making $100k would be discouraged from working by high marginal rates
i happen to think that idea really is ridicuolous. but that’s a different discussion, prolly.
oh, and “ridicuolous” is a ridiculous spelling of “ridiculous”.
I, for one, am happy that I live in a country where economic interest is not the only governing political factor
I don’t know, st. There must better options. Perhaps we need a third or even fourth party. The idea that someone would vote to impoverish themselves because they don’t like the idea of gay marriage (or whatever) strikes me as retarded.
Color me very surprised, regarding the insurance programs. In the case of SS, the cap guarantees anyone making over 90k is going to pay less (as a percentage of income) into the fund than someone making less than 90k. Medicare is also fixed-rate, so someone making $3 million is going to pay the same percentage of their income into Medicare. Overall, someone making $3 million a year is going to pay less of their income into SS and Medicare.
As for FICA, you’re going to see the top-bracket earners putting much more of their money into tax-deferred vehicles than bottom-bracket earners, and that’s a fact. Certainly it’s much easier for someone making over $100k to max out their pre-tax investments than it is for someone making $50k; it’s a matter of disposable income. For the first time in my life, I’m maxed out on investment means to shelter my income from tax. If you don’t like that, well, there is an opportunity for change at hand.
Oh, and I nearly forgot about the mortgage interest deduction. That earns you more in tax savings at higher brackets than at lower brackets.
The idea that someone would vote to impoverish themselves because they don’t like the idea of gay marriage (or whatever) strikes me as retarded.
Particularly when the party that repeatedly and loudly claims that it has the moral high ground does nothing but make empty promises to their religious followers while their tax cuts happen in days.
Making empty promises to one’s constituents is part and parcel of all American politics; Republicans don’t have any particular corner on that market. Where have you been, man?
I think that I am better served going to a privately owned grocery store to buy my food, rather than obtaining my food from a government food distribution center. I know that’s a crazy never-could-happen scenario, but I don’t want the government slowly but surely reducing the number of choices I have in the name of improving my economic well being.
Slart-
The comparison is of the aggregate of income and employee-paid payroll taxes, so yes, they pay a bit more for income taxes, but less for payroll.
That’s the political equivalent of the “Muslims torture more” argument, isn’t it? The fact that Republicans aren’t the only people who lie to their constituency does not mean that they are absolved.
I don’t want the government slowly but surely reducing the number of choices I have in the name of improving my economic well being.
Yep, I sure want the choice between dying because I cannot afford medical care and dying because I cannot afford food.
DaveC: good argument about grocery stores. What is its application to the present set of issues, and specifically to the question: on whom should the burden of taxation fall most heavily?
Because I like using a public highway system rather than private roads, I’m in favor of some sort of taxation. I think it is all right for taxes to be somewhat progressive, but I also think that if only the wealthy are taxed, then only the wealthy should have any say in how that tax money is spent.
No, I’m simply noting for someone (who appears not to have noticed for themselves) that politicians lie to obtain votes. If you’re not aware of it, you too need to pay more attention.
DaveC,
The wealthiest are not only not the only one’s being taxed, they’re not even being proportionately taxed though…the burden for the roads you like is falling on the middle classes disporportionately.
To the end of to-the-pointness, I suggest we take SS and Medicare out of the conversation altogether. Because SS, as we all know, isn’t a tax.
” I don’t want the government slowly but surely reducing the number of choices I have in the name of improving my economic well being.”
Considering I used to have ten chains servicing my area, and now have three, the government has done exactly that. Spending has remained pretty constant, or increased, which means that the tax burden has simply been redistributed. Spending and investment decisions are determined not by efficiency, but by efficiency within a gov’t structured market. Consolidation has occurred not IMO because of a lax regulatory environment or because of market efficiencies, but because of a favorable tax environment. WalMart built their stores in low property tax locations.
One might wish for a tax structure that does not determine microeconomic & macreconomic processes, but it will never exist.
Even if everything else in the Bush platform was roses and candy, ideologically, speaking, his ridiculous, oligarchic tax preferences would make me fight him tooth and nail. I knew that people would underestimate the importance of this — trillions of dollars is a hell of a quality-of-life issue. I, however, thought that there wouldn’t be any other policies to match the sheer efficacy of wrong-headedness. I should have been watching the foreign-policy angle more carefully.
“Perhaps we need a third or even fourth party.”
And we’re as apt to get a third or fourth eye by wishing for it, same as the other, given the systems they’re embedded in. (I happen to think that most voting systems that make for multiple parties have even worse flaws, such as handing huge amounts of power to small extremist parties, but that’s me, who doesn’t like the fine examples of, say, Italy or Israel, despite their greater level of “democracy.”)
…politicians lie to obtain votes. If you’re not aware of it, you too need to pay more attention.
I don’t expect politicians to change as long as their constitutents don’t mind being lied to. Of course, if the constituents don’t care if they are lied to, I have a hard time believing that the constituents really care about the things that they say they care about when they are voting.
Because SS, as we all know, isn’t a tax.
Taxes are taxes, even when they are called fees or insurance contributions.
BTW bob, I rather think you and I could come to some quick agreement WRT tax policy, although I do think that the urge to go fishing rather than work a second of paid OT would dominate if the marginal tax rate were much higher. It just depends on what sort of job you’re in. Personally, I rarely get paid for OT, so the issue is, for me, moot. But I also think there arises pressure to provide some sort of tax relief or other (in the form of shelters) if the upper bracket rate becomes staggering. I’d be all for taking corporate tax revenues, computing a bump in tax rate required to recover those via income tax, and apply that bump.
And here I thought they were mandatory retirement program contributions.
So let’s see, here we have a long detailed post mainly on the unfairness of taxes and how the rich are gaming the system. The same post also praises John Edwards for his performance in the campaign, pointing this out. He, of course, should know all about this considering how he set up an S-corp to avoid paying hundreds of thousands of dollars in Medicare taxes.
Do as I say, not as I do.
He, of course, should know all about this considering how he set up an S-corp to avoid paying hundreds of thousands of dollars in Medicare taxes.
question: are S-corps bad, or the people who set them up ?
[yes, i’m the president of one]
Nothing wrong with S-corp’s or the people who set them up, just found it hypocritical that the guy raving about the class war was helping himself to the spoils.
question: does tax policy have any demonstrable “good”-ness or “bad”-ness, or is it just so?
‘nother question: if I had deductions that I could have taken (but didn’t), does that make me virtuous, or stupid?
Ugh,
In my opinion every American should be able to take as full advantage of the tax laws as they can legally. That’s not at issue here.
What’s at issue is a systematic restructuring of the legal ways in which the uber-rich get to keep their money. As the Times pointed out: “The Treasury Department says that the very wealthiest find ways [some illegal] to shelter a lot of income from taxes.”
Voting against their own interests, essentially…why do they do that?
39% of Americans think they’re in the top 1% of earners–or will be (19% think they’re there now, and 20% think they will be someday).
That’s just jaw-dropping Kyle.
I see similarly deluded optimism among Americans in their 50’s who make less than 60K a year. It boggles the mind.
I think that link can only credibly make that claim for 19%, Kyle, but that’s still chuckle-worthy.
To be clear, I am not one of the 19%. I pretty much know where I am, income-distribution-wise.
What’s at issue is a systematic restructuring of the legal ways in which the uber-rich get to keep their money.
I just thought that it was interesting that you were giving props to John Edwards, one of those uber-rich who found a way (possibly illegal) to shelter income from taxes.
actually, I didn’t know that about Edwards…you got a cite that goes into details?
“‘nother question: if I had deductions that I could have taken (but didn’t), does that make me virtuous, or stupid?”
Yes?
(Deeply considered alternative answer: no; I like to work all the angles.)
slarti,
“‘nother question: if I had deductions that I could have taken (but didn’t), does that make me virtuous, or stupid?”
Depends (a bit) on your intent. It’s hard to be virtuous if you did not know you could take them.
(Deeply considered alternative answer: no; I like to work all the angles.)
Hmph. The correct answer is, of course, “It depends.”
It is a mathematical certainty that when percentage of a total increases in one area it must decrease in another area. It is not a mathematical certainty that decrease in share is the same as a decrease in income or a decrease in lifestyle. I’m not disturbed at all by an increasing ‘share’ of the pie so long as we keep the pie growing enough that non-elites experience significant increases. If the share of the wealth were to double, but the size of the economy were to grow by a factor of 10, I would be thrilled not apalled.
Most of the non-elites have experienced small growth in wages, but vast growth in purchasing power as once-luxuries become commonplace. So long as that is the trend, I’m not particularly freaked out by a failure to soak the rich. (In anticipation of the next objection–medical expenses, I note that there have been huge improvements in medical technologies over the last ten years. Therapies which were totally unavailable to anyone are now commonplace for the middle class or even lower-middle class. The fact that we are going to need to make a thus-far unarticulated choice about how we are going to deal with heroic measures at the end of life if people don’t want to pay for such measures themselves does not strike me as mainly an issue of tax policy, but rather a mostly separate issue of its own.)
I did know, and I still can. I’m conducting an internal debate as the morality of accepting a deduction for hurricane damage. The way the IRS has mechanized that is, with apparent perversity, an amended return for a prior year. Apparent, because that gets you into a queue where you’re eligible for a refund just as soon as the IRS can process the amended return.
Why this is even a question is a little unclear to me, but I look at this as an extraordinary circumstance in which the government is prepared to make me a gift of cash that I haven’t earned and don’t (in the strictest sense) need. A more ardent devotee of Rand wouldn’t even hesitate, but probably wouldn’t be where I am in the first place.
I could only find a short description via google. If you have access to Lexis you should be able to search through the Tax Analysts Tax Notes Today database and find it that way.
Basically, he set up an S-corporation with himself as the sole shareholder. An S-corp does not pay a corporate level tax and its income is passed through to the shareholders. He then entered into an employment contract for his services to the S-corp, which paid him a salary of around $360,000 per year. All of his earnings from his trial work were then earned by the S-corp, approx 24.5 million over four years, with the 360k paid to him each year. While he would have to pay income taxes on the earnings as they pass through to him, the non-salary earnings were not subject to the 2.9% medicare tax, saving him approx $635,000 in taxes over those years.
The possibly illegal (meaning civil penalties, nothing criminal) portion comes from whether or not the salary paid to him was reasonable compensation for his services, since he was dealing with an entity he himself wholly owned. It seemed to me that the better argument was that the vast majority of the income should have been characterized as salary, on which he should have paid medicare taxes, making him liable for those taxes, interest and probably penalties.
Nothing wrong with S-corp’s or the people who set them up, just found it hypocritical that the guy raving about the class war was helping himself to the spoils.
seems to me that he’s trying to make it easier for people on the bottom to reach the level he’s at – or at least make it easier for them to get a leg up. i don’t see anything hypocritical with that. if he’s made a lot of money during his lifetime, it’s not his fault, it’s to his credit. and if he wants to help other people do the same, good for him.
and, you can only get so much out of an S-corp before the IRS starts asking questions: you can’t just take huge chunks of cash out of it without paying taxes on it. and there are other reasons to set up S-corps besides the tax issues: liabilities, for one.
Here’s the OJ article on Edwards (with some digs at Kerry, which are rather less solidly supported).
Yes, S-corps have their charm. You can employ your wife and kids, for one, and conduct annual board meetings in Aruba (or, given recent news, maybe somewhere else). One key attraction is you can max out 401(k) (or equivalent) contributions for both yourself and your spouse, even if it’s in reality true that you’re the only one doing any work.
I’m not disturbed at all by an increasing ‘share’ of the pie so long as we keep the pie growing enough that non-elites experience significant increases.
Given that we know that an increase in income inequality leads to those with less relative income to be less happy, the implication is that you are not disturbed that the result of government policies will be that the vast majority of Americans will be less happy.
I am disturbed about that, and I think something should be done about it.
This is without contesting whether “non-elites” have experienced significant increases (they haven’t).
It seemed to me that the better argument was that the vast majority of the income should have been characterized as salary, on which he should have paid medicare taxes, making him liable for those taxes, interest and probably penalties.
“vast majority” is not what an accountant will tell you. all that i’ve used have recommended that i shoot for a 50/50 split, roughly. you have to pay yourself a reasonable salary for the work you do and the money the company brings in; and then you have to not over-do it with the profit distributions.
there are hundreds of thousands of S-corps out there, and that’s just the way they work.
You can employ your wife and kids, for one, and conduct annual board meetings in Aruba (or, given recent news, maybe somewhere else).
you can employ your family with any kind of business.
Sebastian Holsclaw: Most of the non-elites have experienced small growth in wages, but vast growth in purchasing power as once-luxuries become commonplace.>?
Plasma TV’s and Hummers are indisputably cheaper now than they have ever been. But isn’t the price of food and shelter slightly more important? You can’t eat or live in a $40 DVD player. The same applies to health care. MRI’s and Lasik surgery might be cheaper and more readily-available than ever but what about the cost of an annual exam or a hospital stay? And this is not even to mention the cost of education.
This argument sounds an awful lot like a modern twist on “Let them eat cake.”
cleek –
Is your S-corp wholly owned by you, with you being the only employee and is all its income derived from services performed by you?
I may have overstepped with “vast majority,” but it seems to me that it would hard to get comfortable on Edwards facts with anything less than 70% of the income being services, and more likely that you’d have to go to 85 or 95% in order to get the IRS to go away without much of a fight. Edwards, on the other hand, had 5% allocated to his services, and 95% to the S-corp.
Although I am all for correcting inequities in the tax code, and ensuring that top earners are not benefitting at the expense of growth in the lower brackets, contra felix’s remark, I am not at all certain that the job of government is in any way to make people happy.
I guess I’m one of the lucky ones, then. Marrying someone who makes as much as I do helps; doubling household income usually translates into mobility. At least, for the purposes of the census data.
But not everyone can be employed as a business, AFAIK.
Is your S-corp wholly owned by you, with you being the only employee and is all its income derived from services performed by you?
yes. i am the sole shareholder, sole employee, and President (and i do not speak for The Corporation when i discuss it).
Edwards, on the other hand, had 5% allocated to his services, and 95% to the S-corp.
maybe i misread your numbers above, but do we know how much he took out in profit distributions ?
in my situation (speaking here as Treasurer of The Corporation), there is usually a lot of money that isn’t used for salary or for profit distribution – that is, i don’t take all of the profits out of the business after paying salary.
his corporation could be sitting on a big chunk of cash – cash that’s being paid out as salary and smaller distributions over time. just a guess, of course – an accountant could probably speak to this better than i could.
Phil–I am not at all certain that the job of government is in any way to make people happy
No, but if (as IIRC Locke claims) the job of government is to protect property (material and otherwise), then it stands to follow that it is the job of the government to keep people happy enough that they continue to follow the law and do not start taking other people’s property. From this viewpoint social welfare is a matter of recognizing that at some point it costs more to hire more people to protect property through enforcement than it does to redistribute that money back to the people who are upset in the first place. Not a very noble view, but one that should perhaps make sense to those who view everything through market-economic colored glasses.
I suggest that this far into the governmental roll-back that started with Carter and continues through today we may have once again hit the point where economic and social pressure on the bottom will not be contained by additional enforcement.
Although I am all for correcting inequities in the tax code, and ensuring that top earners are not benefitting at the expense of growth in the lower brackets, contra felix’s remark, I am not at all certain that the job of government is in any way to make people happy.
Governments will tax, and the consequences of the way they do so will, depending on the particulars, either make people happy, or unhappy. This can not be avoided.
If you would like to argue that there are other purposes of tax policy that justify making people unhappy, and that current tax policies will suit those purposes, let’s hear what you think those purposes are, and why you think more progressive tax policies would not suit those purposes.
So, help me understand how we are really supposed to stop this income disparity.
AFAICT, because the US is a popular place to immigrate to, the ranks of the “poor” are continually replenished while the “elites”, who have no income ceiling, have incomes that are constantly redefined upward.
Now, I’m all for everyone paying a fair share, in fact, despite my decidedly non-elite status, I voted to pay more local taxes, but I really don’t know how, in a growing economy with a constant influx of new immigrants, income disparity will not continually rise. And that’s true even if we put the top marginal rate at 100% because I would expect even more immigration as social services got even better driving disparity from the bottom, right?
Commodity Fetishism
“As Nobel Prize winning economist and philosopher Amartya Sen argues, it doesn’t matter if the total bundle of goods received by the poorest is getting larger if, at the same time, social inequality is increasing. That is to say, it is harder to function as a poor person in a rich society than in a poor one, even if you have more material possessions. An argument borne out by the fact of lower life expectancies amongst poor and minority populations in industrialized nations when compared with materially poorer populations in developing nations.”
Will Wilkinson, Cato libertarian, who shows up in the comments, was very interested in inequality, and had several posts. Mark Kleiman also had a post.
I’m not particularly freaked out by a failure to soak the rich
Soak the rich? We’re just talking about making it fair. And, I assume, making it fair for people in your bracket (or at least a bracket you can reasonably expect to be in soonish) too, Sebastian. Consider the following:
Moreover, consider this, from your state, no less:
It’s simply not true that average Americans are benefitting in anywhere close to the same fashion as the wealthiest Americans. In fact, the disparity is beyond obscene.
“Because I like using a public highway system rather than private roads, I’m in favor of some sort of taxation….”
I neglected to mention that this guy is an obvious commie. He approves of jackbooted thugs stealing our money at the point of a gun!
umm, for the record, I would also like to say that the fact of increasing wealth and income inequality does not necessarily mean that such outcomes, or the degree of outcomes, were the intention of the tax cuts.
Restricting myself to the most recent round, I am not positive that the tax writers expected a flat stock market and weak job growth after 4 years. They might have expected more risky investment strategies from the rich, creating more losers, but with very active new investment creating new technologies and industries, meaning jobs and wages. As to why with high earnings and productivity investment(and R & D) has been so weak, well, it is a mystery to many. They might also have been expecting more overseas equity investment.
Then again, they might be getting exactly the outcomes they desired.
I neglected to mention that this guy is an obvious commie.
If there was a barter-system turnpike in my neighborhood I wpuold certainly use it. But there ain’t one and in the meantime I am waiting for my personal jet-pack.
cleek –
I obviously don’t know the details of your S-corp situation, so 50/50 could be perfectly acceptable.
As far as my Edwards numbers, I think that over four years the S-corp “earned” 24 million or so. All of that would be income to Edwards in the year earned as the sole owner, after any deductions. One of the deductions would be for his salary, which would be income to Edwards and on which payroll taxes would be due.
In any event it (generally) doesn’t matter whether Edwards got cash distributions over and above his salary in a particular year or not, he owes income taxes on the S-corp income, the only question is whether that income should be characterized as income earned by the S-corp (and thus not subject to the payroll taxes) or earned by Edwards as income for personal services performed by him. Perhaps whether or not he actually received a distribution in the year in question is one factor in the salary vs. corporate income debate, but just one.
Edward, I’m not sure what the point of that quote was. What does competition between (in LA often illegal) immigrants and teenagers for entry-level jobs have to do with tax policy? The NYT article juxtaposes the two, but shows no link. If the Bush tax cuts were repealed would immigration slow down in LA?
“It’s simply not true that average Americans are benefitting in anywhere close to the same fashion as the wealthiest Americans. In fact, the disparity is beyond obscene.”
My point is that I, and lots of other people, don’t care that the wealthy benefit more than the rest of us so long as the rest of us are benefiting quite a bit. I’m right there with you on the idea that on average Americans ought to do better and better every decade. I’m not with you on the idea that the gap between the poor and the rich should close further and further every decade. I don’t believe that there is an eternal right of people to narrow the difference between the rich and the poor–I believe that making the poor better off is vastly more important than making sure that the gap between the rich and the poor is reduced. That is why I focus on things like making better schools despite union opposition rather than worrying about how much the top 0.1% makes. I don’t see any reason to deform the whole system of how incentives are maintained in our society just to make sure that the top 0.1% don’t make “too much”.
I’ve been in the bottom fifth of earners, and I’m darn glad I was in the bottom quintile in the 1990s and early 2000s rather than in the 1940s or 1950s.
As it happens I’m open to all sorts of tax systems which would be better than what we have. A no deductions system with a graduated series of tax brackets that went from 0% to 28% on a near-log curve that topped out in the $300,000 range would be great. It wouldn’t do anything to make sure that the gap between the rich and the poor narrowed, but I wouldn’t care.
The problem is that you conflate two very distinct issues: tax equality and income equality. If you want to say that no rich person should ever pay a lower percentage of taxes than a poorer person (that the slope of a tax curve should never be negative) fine, but that has almost nothing to do with the income inequality concerns that you try to mix in. If your only reason for the first proposition is the second justification–you won’t get far with me because I consider income inequality to be a mostly uninteresting and unimportant topic in an otherwise successful economy.
In short I strongly believe that too much of a focus on income inequality can tend to cause problems with the far more important question of whether or not things are improving decade to decade. I want absolute measures to be positive. I don’t care so much about the relative measures.
So it may be that I have been distracted from your tax fairness point (which I think I might agree with) by you income inequality point (which I pretty much think is a bad focus).
DaveC: “I think that I am better served going to a privately owned grocery store to buy my food, rather than obtaining my food from a government food distribution center. I know that’s a crazy never-could-happen scenario, but I don’t want the government slowly but surely reducing the number of choices I have in the name of improving my economic well being.”
Upon what experience or evidence do you make the conclusion of the first sentence? How does this wash in light of heavy agricultural subsidies or the increase in monopolies? Is consumer choice more valuable than economic well-being? Haven’t corporations, with the aid of government, been reducing the number of choices while improving THEIR economic well-being? Because one thinks that a choice between buying a pair of jeans at The Gap versus Old Navy is a legitimate choice and constitutes freedom one supports this? Americans’ role as consumers is the highest expression of citizenship?
To follow on Bob McManus’ 4:25 comment and similar thoughts by others:
In Robert Collin’s book “More: The Politics of Economic Growth in Postwar America” he writes on the solution to the economic crisis of the Great Depression (high unemployment, inflation, factories not operating at full capacity, class conflict, etc.): “[T]he [Council on Economic Affairs] presented the vision of a redistributive mass consumption society in which ‘the enlarging production’ would ‘go increasingly to filling in the consumption deficiencies of the erstwhile poor.’” This consumer economy solution was not about the equitable redistribution of wealth, but about the creation of new markets, and, without the necessary taxation of corporations and the upper X% to redistribute capital downward, a recipe for the upward consolidation of wealth – what we are seeing today that Edward has pointed out in his post.
The problem is that you conflate two very distinct issues: tax equality and income equality
There aren’t two different issues. More progressive tax policies lead to greater income equality.
I don’t care so much about the relative measures.
And, since relative incomes (income equality) and happiness are linked, by implication you do not care so much whether people are happy. Glad to get that out of the way, it explains why I seldom agree with you about anything else, either.
oddly enough, i almost agree with SH; tax policy and income inequality aren’t necessarily linked.
BUT,
the administration is doing a piss-poor job of paying its bills. Since the tippy-top taxpayers have managed to capture so much of the increase in the economic pie, it’s perfectly fair to ask them to do more to pay the bills.
also, the administration is doing a piss-poor job of answering the question why there has been no effective wage growth for a huge slice of society. (I’d be astonished if the admin even thought the question was worth considering.)
what kind of questions are worth looking at? try some of these:
should the minimum wage be raised? should employers be fined heavily or jailed for repeat use of undocumented aliens? does the NLRB Act need to be revisited? should WalMart be investigated criminally for anti-union activity? should health care insurance be nationalized? should unemployment benefits be extended? do our schools actually suck or is it just posturing? if so, is there a federal role? should securities laws be changed to allow shareholders greater authority in setting executive compensation, or to sue for gross overcompensation? what is the appropriate level to tax capital, compared to labor?
more broadly, it appears that since 1980 the Republican Party has stood for two things: shifting taxes from present taxpayers to future ones, and shifting risk from society to individuals least able to manage risk.
that may not have been the intent, but it’s certainly the outcome. Hope you’ve enjoyed the ride; if KDrum is even close to correct on his peak oil series, our economy is about to get absolutely walloped. the coming democratic majority (if it ever actually gets here) may be really really angry.
Re Edwards: that particular scam is, IMHO, very difficult to defend under current law. Yes, an awful lot of accountants will tell you that a 50-50 split between salary and S-corp. dividends (or retained earnings) is OK, but in a personal service business I just don’t see it. You’re just playing the audit lottery. I have a vague recollection of seeing something recently about the IRS trying to crack down a bit, but it’s probably too little, too late (as is so often the case with IRS enforcement efforts).
If you would like to argue that there are other purposes of tax policy that justify making people unhappy, and that current tax policies will suit those purposes, let’s hear what you think those purposes are, and why you think more progressive tax policies would not suit those purposes.
I’m fairly certain that I neither defended current tax policies nor denied that tax policy should be more progressive. In fact, looking back, I’m absolutely positive that I did neither of those things. Perhaps you would like to have an argument with the little man in your head who, apparently, did so?
I did, on the other hand, posit that the purpose of government is not to make people happy. Perhaps you would like to defend the premise that that is, in fact, the purpose of government.
You might also want to consider that, assuming that “rich people” are included in the class of “people” as used in your quoted material above, you should probably then go on to defend why it would be OK to make them unhappy but not other people. Or you might want to consider that happy-making is, in fact, not a purpose of government. Your choice.
To restate my last paragraph there, I don’t need to argue that “there are other purposes of tax policy that justify making people unhappy,” as you have already done so, felix. You argue for a more progressive tax policy in order to reduce income inequality, a policy that you know will make top earners more unhappy, therefore you in fact argue that there are purposes of tax policy that justify making people unhappy. Glad I could clear that up for you.
And, since relative incomes (income equality) and happiness are linked, by implication you do not care so much whether people are happy. Glad to get that out of the way, it explains why I seldom agree with you about anything else, either.
What a load of crap. Is income equality the only thing that affects peoples’ happiness? If Sebastian, say, supports the current tax scheme but also supports giving every household in the two lowest quintiles a free puppy and four weeks in Aruba — which would make most people fairly happy — is it cool then?
Is there anyone around here capable of forming an argument which doesn’t rely on an excluded middle?
I, like Seb, care more about increasing prosperity for all, with prosperity for the poor discounted somewhat because of Sen’s concerns. And if, in fact, our present tax system could be justified as a way of improving everyone’s lot, I’d accept it. However, that isn’t the case. We presently have a tax system that will worsen everyone’s situation over time, because of the deficit. It could do so simply because of foregone investment opportunities and debt service costs, or else it could be more dramatic and produce a serious economic crisis, but it will definitely make people across the board worse off.
At the same time, there is approximately no reason to think that this tax structure improves everyone’s lot (or: the lot of the poor or middle class), even if we leave aside the fact that we’re running a deficit. Bush’s tax cuts were very badly designed as stimuli — they put the most money into the hands of those whose marginal spending increases would be lowest, and had very little to do with stimulating productive investment.
So, while I accept Seb’s general point, I don’t think it implies much in the present case.
I did, on the other hand, posit that the purpose of government is not to make people happy
Once again, the decisions the government makes about tax policy will (yes, necessarily) affect income equality, and yes, those decisions will make people either more or less happy. Do you believe the honestly believe government should ignore those facts, as your arguments imply?
You might also want to consider that, assuming that “rich people” are included in the class of “people” as used in your quoted material above, you should probably then go on to defend why it would be OK to make them unhappy but not other people
When extreme income equality exists, and tax policies are put in place that will make that income equality even more extreme, a few people will be made more happy, the vast majority will be made less happy. You might want to go on to defend why it is OK to make 90%, or 99%, of the population less happy while making 1%, or 10%, more so.
You argue for a more progressive tax policy in order to reduce income inequality
No, I argue that making tax policy less progressive when income equality is already extreme, as has been the case lately, makes a large percentage of people unhappier, and a small percentage of people happier. You can ignore those effects and claim it is not the business of government to worry about the effects of its policies on the happiness of its citizens, although I find that to be an immoral position. You could argue that there are other considerations, in addition to happiness, that affect tax policy and that these considerations necessitated a less progressive code be enacted in spite of the effects that policy would have. If so, I’d like to hear what the considerations are.
If not, what could possibly justify the government taking steps that ensure most of its citizens will be made unhappier?
OK, back to first principles: felix, can you adequately demonstrate for the audience at home that you understand the difference between a purpose and a side effect? It would help the discussion ever so much if you could.
You might want to go on to defend why it is OK to make 90%, or 99%, of the population less happy while making 1%, or 10%, more so.
You’re arguing with imaginary people again, I’m afraid. I mean, feel free to copy and paste this sentence to someone who actually defends the current tax system. When you find one. Which, by the way, isn’t me. Seriously.
You seem to be arguing, not-so-incidentally, that happiness is, in fact, the primary consideration in the enactment of tax policy. (You could argue that there are other considerations, in addition to happiness, that affect tax policy . . . ) Do you really believe that? Because it’s kind of, well, stupid. Not to put too fine a point on it.
All of that would be income to Edwards in the year earned as the sole owner, after any deductions.
but that’s not how S-corps work. income in excess of salary does not automatically flow to the owner – primarily because there is no “owner”.
for example, note how i’ve been careful to make it clear that i don’t speak for ‘my’* corporation – the entire day to day function of the corporation is my responsibility, but i am not the corporation; it exists independently of me. i am not the ‘owner’, i merely hold the most stake in its business and am the person acting in its interests. and the big reason for that separation is liability – if i even for a second conflate my personal identity with that of the corporation, i knock a hole in the shield that protects my own personal liability from that of the corporation. part of that separation is strict accounting – it’s the corporation’s money, not mine.
if Edwards has an accountant and a corporate attorney, he’s not mixing his cash flow with that of the corporation.
In any event it (generally) doesn’t matter whether Edwards got cash distributions over and above his salary in a particular year or not, he owes income taxes on the S-corp income
it certainly does matter, because the corporation’s income is not his. he gets a salary and an unspecified share of the profits. but
* = corporation of which i am the primary shareholder and sole employee
scratch that “but”
but that’s not how S-corps work. income in excess of salary does not automatically flow to the owner – primarily because there is no “owner”.
Now you’re confusing me. S corps do have owners–their shareholders–and if John Edwards was a solo practitioner, he would have been the sole shareholder of his S corp. That also means that for tax purposes, 100% of the S corp’s taxable income flowed through to his individual return, whether the cash was distributed to him or retained by the corporation. It’s true that only salary, not dividends, is taxable as wages for Medicare tax purposes, but there are anti-abuse doctrines that should enable the IRS to police an highly artificial split between salary and dividends, and IMO it’s highly artificial for a personal service business to be characterizing a large chunk of its cash flow as effectively earnings from capital rather than earnings from the shareholder/employee’s personal services in the business. Which is not to say that the IRS is actually doing much to police this particular abuse, but that doesn’t mean it’s not an abuse.
You’re arguing with imaginary people again, I’m afraid.
No, I am arguing, it seems, with someone who won’t admit that when he says something equals 2+2, he is also saying that the same thing is equal to 4.
You seem to be arguing, not-so-incidentally, that happiness is, in fact, the primary consideration in the enactment of tax policy.
No, I am arguing that if the government is going to take steps that make the vast majority of its citizens less happy, that should be justified by pointing to some aspect of the new tax policy that will accomplish something that the old one wouldn’t, and that this effect should be large enough to outweigh the effect of making hundreds of millions of people less happy.
I’ve asked several times if you think there are any such aspects of the current policy that meet that critera, and if so, what they might be. You’ve got nothing.
But, from your comments, you don’t think happiness of a government’s citizens should be a consideration in that government’s decisions, which is, to me, immoral. And to match your tone, stupid. Feel free to correct me if I’m wrong, or, you know, you could, theoretically, actually state your argument clearly.
No, I am arguing, it seems, with someone who won’t admit that when he says something equals 2+2, he is also saying that the same thing is equal to 4.
No, you’re arguing with someone who does not support the Bush tax cuts and wants them to expire, yet who nevertheless understands, as most big boys and girls do, that the government is not his parents and does not exist to make him happy.
I’ve asked several times if you think there are any such aspects of the current policy that meet that critera, and if so, what they might be. You’ve got nothing.
That’s because I don’t support the current policy, as I bloody well stated. If you would actually read what I, as opposed to the imaginary opponent in your head, was writing, you’d have seen that. To wit, from my first comment in the thread, “Although I am all for correcting inequities in the tax code, and ensuring that top earners are not benefitting at the expense of growth in the lower brackets . . . “ If you have a hard time understanding that statement, I can draw pictures or provide flash cards or whatnot.
But, from your comments, you don’t think happiness of a government’s citizens should be a consideration in that government’s decisions, which is, to me, immoral.
If it helps you sleep at night, I spend exactly the same amount of time each day worrying about what felixrayman thinks is immoral as I do thinking about what’s on The Golf Channel right now. Which is to say, none.
Feel free to correct me if I’m wrong, or, you know, you could, theoretically, actually state your argument clearly.
I did. Repeatedly. The problem is that, having mistaken me for someone who supports the Bush tax cuts, you fail to read it. Repeatedly.
Not to get involved Phil or felixrayman‘s little spat, but it should probably be pointed out that there are two possibilities the current dichotomy omits: happiness-neutral policies (under whatever metric of happiness you happen to be employing) and happiness-independent policies (i.e. regardless of how it makes people feel we’re doing this anyway). I suspect (hope?) that once you two start acknowledging the existence of these alternate positions, as well as interpolations into the continuum between the various positions, you’ll find each other’s arguments… well, not convincing, but at least not outright illegitimate either.
No, you’re arguing with someone who does not support the Bush tax cuts and wants them to expire, yet who nevertheless understands, as most big boys and girls do, that the government is not his parents and does not exist to make him happy.
OK, ignore the Bush tax cuts, and tell me, in general, at high levels of inequality what you think could justify decreasing the progressivity of the tax code.
And, whatever the government “exists” for, if the choice is between a policy that makes the vast majority of its citizens unhappier and a policy that makes the vast majority of its citizens happier, I think it’s pretty clear what the choice should be, and your derogatory comments seem to imply you feel it shouldn’t be a consideration.
Again, feel free to actually state your argument if you have one.
It’s true that only salary, not dividends, is taxable as wages for Medicare tax purposes, but there are anti-abuse doctrines that should enable the IRS to police an highly artificial split between salary and dividends…
maybe i’m misunderstanding the argument or misusing terms, but the profits that exceed salary and shareholders distributions (aka the current balance in the company’s bank acccunt, less liabilities) are not just there for the taking…
if Edwards was dumb enough to run a Senate and Presidential campaign after a stunt like that, he deserves a hell of an audit.
and, AFAIK, he didn’t take those profits and spend them. for all we know, he’s got a big wad sitting in a bank account in the corporation’s name.
I did implicitly recognize them, Anarch, when I chided felix for formulating an argument, and particularly for wielding it against Sebastian, which relies entirely on the excluded middle for its existence. My arguing that the government does not exist to make me — or anyone else — happy is, in fact, an argument for, as you say, “happiness-independent policies.”
The job of government is to protect people’s rights, provide safety and security, and provide justice, with equal treatment under the law for all. All or any of those things, as applied to different groups, are bound to make someone unhappy, about which I care not a whit.
Legalizing gay marriage, for example, will make gays happy, but it will certainly make antigay bigots and some other groups unhappy out of all proportion. But the policy should be pursued not based on the net happiness it creates, but because it is just and fair.
Whatever happened to the pursuit of happiness? Good lord.
Felix’s use of the possessive “government’s citizens” to describe the relationship between his hypothetical happiness-inducing autocrats and the helpless, morose masses indicates a bizarre, “feel-good” utopian totalitarianism is going on here.
It is an inescapable fact that no select group of elected or appointed officials can manage the happiness of nearly 300 million people. It is absurd on its face.
Felix, does Bush understand how to make you happy? Does Congress?
. . . if the choice is between a policy that makes the vast majority of its citizens unhappier and a policy that makes the vast majority of its citizens happier, I think it’s pretty clear what the choice should be . . .
Horsefeathers. A policy that gave every household in the U.S. a shiny new Corvette tomorrow morning would make the vast majority of citizens very, very happy, and yet it would be a pretty goddamned stupid policy.
. . . tell me, in general, at high levels of inequality what you think could justify decreasing the progressivity of the tax code.
When have I supported decreasing the progressivity of the tax code at all? I’m going to need a precise quote, here. Why are you asking me to defend positions I do not hold?
maybe i’m misunderstanding the argument or misusing terms, but the profits that exceed salary and shareholders distributions (aka the current balance in the company’s bank acccunt, less liabilities) are not just there for the taking…
If you’re the 100% shareholder of the corporation, they most certainly are just there for the taking. You just need to do the appropriate paperwork to document corporate approval of the distribution. And if Edwards does have a big wad still sitting in his corporation, so what? The legal distinction between an individual and his 100%-owned corporation is meaningful and important, and if you are such an individual you want to be careful to preserve that distinction, but tax law was developing doctrines to prevent individuals from using wholly-owned corporations to achieve unwarranted tax benefits at least as early as the 1930s.
What Edwards did was the same thing that many, many other people do, and they generally get away with it. It’s not an egregious violation of the law, but it is, in my view, an aggressive position and one that ought not be encouraged. The fact that he did it doesn’t have much impact on my view of him as a politician–after five years of the Bush Administration, it’s somewhere down around jaywalking on the list of things I’m worried about–but he ought not to have done it.
If you’re the 100% shareholder of the corporation, they most certainly are just there for the taking.
yes, the sole shareholder can just write the check, since approval is implicit. but what i’m saying is that the IRS would not approve, nor would any accountant i’ve ever come across. the advice i’ve received has always been to play it safe and don’t make a target of your company – it’s not worth the few percent savings; just raise the salary, if you need more income.
Edwards’ numbers are at least a couple of orders of magnitude higher than what i deal with and if my accountants are telling me to be careful, i’ve gotta think his are even more wary – 20M+ is a big target.
though maybe i just choose ultra-conservative accountants…
My arguing that the government does not exist to make me — or anyone else — happy is, in fact, an argument for, as you say, “happiness-independent policies.”
I gathered that was what you meant, but the way in which you were phrasing it suggested an alternate hypothesis: that the government should seek out “happiness-reducing” policies (which part of what I think felix is arguing against). That said, would you be amenable to this formulation or do you still find it problematic: in the absence of other compelling interests, a government’s policy should strive to make the largest number of its citizens* happy?**
* Jonas? There’s nothing in the slightest bit “bizarre, ‘feel-good’ utopian totalitarianism” about using the possessive to denote the relationship of a government to its citizens. [See? Did it again!] It’s a feature of English. Get over it.
** If you find the implicit utilitarianism of that formulation troubling, replace “largest number of its citizens” by some other maximality relative to whatever metric you feel appropriate.
That said, would you be amenable to this formulation or do you still find it problematic: in the absence of other compelling interests, a government’s policy should strive to make the largest number of its citizens* happy?**
I find it troubling to the degree that, absent any compelling interests, I’d want to know what the particular policy is and, more importantly, why the government is pursuing it. To what end would it be pursuing policies in which it does not have compelling interests? Those enumerated powers are there for a reason, after all.
(I have no problem with utilitarianism per se. I tend in that direction anyway, philosophically/metaphysically/what have you; but that doesn’t mean that I want the government to be the agent for all [or even most] utility-maximizing functions.)
“OK, ignore the Bush tax cuts, and tell me, in general, at high levels of inequality what you think could justify decreasing the progressivity of the tax code.”
At almost any level of inequality which I think is likely in the US, any increase in overall wealth (including making useful tools more common by making them cheaper a la cell phone and automobile) which amounted to about a 1% increase per year would be justifiable. Compound increases over decades make up for a lot of ills. I suspect the problem is that we have an extreme disagreement about what constitutes “high levels of inequality”. If there was a medical therapy which allowed rich people to triple their lifespans but rich meant only the top 0.1% of people we would have a situation like the one you are trying to describe. But when my lower middle class teacher grandmother can live comfortably (though not wonderfully) into her eighties and nineties and rich people do the same but more comfortably I just can’t get too worried about the issue.
The problem is that the income inequality issue just isn’t appropriate for the discussion. The fact that it not only comes up, but dominates the discussion is a serious flaw in our ability to have a discussion about the topic. Even if the Bush tax cuts were repealed this moment and if the percentage difference in tax rate between now and the repeal were then quadrupled, it still would not have a very big effect on income inequality because we would still be talking about a change in marginal tax rate from the low thirties (high twenties?) to the mid thirties. Even if we were to go to an economically very noticeable 50% you wouldn’t change income inequality very much–the top 0.1% you are fretting so much about would still be fabulously more rich than the rest of us. Income inequality just is not one of the bigger deals in this discussion. There are lots of other factors which are a much bigger deal.
You can argue against the Bush tax cuts from hundreds of more useful angles. The debt side. The poorly targetted for stimulus side. The we should cut government expenditures side. Arguing that rich people can afford small marginal increases better than poor people would even be a legitimate argument. But thinking that the kind of tax differences that would be required to protect an income equality vision have much to do with the Bush tax cuts pro or con is just crazy.
Yeah, you’re right, I just lost it when I read this argument. I’ll leave you and Phil to the deeper philosophical discussion of this notion.
At almost any level of inequality which I think is likely in the US, any increase in overall wealth (including making useful tools more common by making them cheaper a la cell phone and automobile) which amounted to about a 1% increase per year would be justifiable
First of all there is no relationship between income equality and wealth generation in the real world. So this is just wrong on the facts. Second, why would an increase in wealth be justifiable if it made most people less happy? Your life expectancy example is a canard, as the experiences of other industrialized nations show.
The problem is that the income inequality issue just isn’t appropriate for the discussion
The level of income equality is perfectly suited to a discussion about Bush’s fiscal policies. It has a real effect on people’s lives, and yes, on their happiness.
yes, the sole shareholder can just write the check, since approval is implicit. but what i’m saying is that the IRS would not approve, nor would any accountant i’ve ever come across. the advice i’ve received has always been to play it safe and don’t make a target of your company – it’s not worth the few percent savings; just raise the salary, if you need more income.
Now I’m really confused. Your accountants are telling you your S corporation shouldn’t pay dividends to you? Why not? And why would the IRS care? It’s your corporation, it’s perfectly proper for a corporation to pay a dividend, and it’s already been taxed (assuming it’s derived from corporate earnings). The versions of the S corp dodge that I’m familiar with involve paying the shareholder/employee a modest salary plus a dividend equal to most or all of the remaining corporate income, and AFAIK that was basically what Edwards did.
Unless maybe what your accountants are telling you is don’t pay dividends in lieu of salary to get around Social Security and Medicare taxes? If that’s what they’re saying, I agree. But even then, if you’re talking about a personal service business such as the practice of law, I think it’s pretty difficult to justify the need to retain a bunch of earnings within the corporation (although maybe a plaintiff’s lawyer has a better case than most), so I don’t think that leaving the money inside the corporate shell necessarily solves the tax problem.
It is an inescapable fact that no select group of elected or appointed officials can manage the happiness of nearly 300 million people
It is an inescapable fact that the policies of elected or appointed officials will have an effect on the happiness of the people, and it is also an inescapable fact that in some cases (income inequality, for example), it is quite predictable in advance what those policies will be. To ignore that is, in my opinion, not moral.
Which is certainly not to argue that happiness should be the only metric, but I haven’t heard many other good ones yet. Still waiting.
A policy that gave every household in the U.S. a shiny new Corvette tomorrow morning would make the vast majority of citizens very, very happy
No, it wouldn’t – for two reasons. First of all, you aren’t looking at net effects here. The Corvettes would need to be paid for, either by taxing, raising interest rates, or seigniorage, which would balance out any possible positive effects, and depending on how this was implemented, might make most people less happy.
Second, what we know from looking at the effect of income on happiness is that once income reaches a certain minimum level, increases in absolute levels of income have little effect on happiness, in contrast to changes in relative levels of income. So, in your example, most people would not be made happier, but the person living in desperate poverty who could sell the Corvette for say, food, or needed medical treatment would indeed experience an increase in happiness. And while I do think it is a moral imperative to help people in those circumstances, there are more efficient ways to do so than doling out Corvettes.
Seb–At almost any level of inequality which I think is likely in the US, any increase in overall wealth (including making useful tools more common by making them cheaper a la cell phone and automobile) which amounted to about a 1% increase per year would be justifiable.
1. Given that logic, and given that earnings are largely tied to education, would it be fair to tax the upper 10% more in order to provide everyone in the US with four years of college tuition, room and board guaranteed? Or would it be unfair to take money from those with more money in order to increase wealth (assuming that a more educated populace is also more productive)?
2. Why does every justification of economic inequality assume that there must be a huge surplus of wealth in the hands of a relative few and that this is the condition from which overall wealth increases? Does this go back to Locke’s mythical state of nature?
Not just for Sebastian, since these are general questions.
Felix,
It is unscientific hubris for you to maintain that the effect of policies upon hundreds of millions of peoples happiness will be “quite predictable in advance.” That’s a technocratic fantasy. As is the notion that happiness is a “metric” that can be reliably measured.
Meanwhile, one of the countless moral hazards of happiness-maximization as the primary guiding principle of government is that no principle of liberty can survive it. I’m sure any number of your political beliefs could not withstand an honest auditing of their effects on the “happiness of the people.” That would be true of nearly anyone of any political persuasion.
If wealth redistribution had absolutely neutral effects on everything else – the economy, income mobility, etc… would you support it solely on the basis of happiness?
I’d suggest that very few people even know what would make them happy. If they did, wouldn’t they be pursuing it just as hard as they could? Just something to consider.
Speaking strictly from personal experience, what makes me happy eventually makes me fat and dumb as well, which in turn eventually makes me unhappy. So if you ask someone like me what will make me happy, I’d have to answer something other than the obvious, direct choice.
It is unscientific hubris for you to maintain that the effect of policies upon hundreds of millions of peoples happiness will be “quite predictable in advance.”
It is, in fact, scientific, and studied the way most other things are.
As is the notion that happiness is a “metric” that can be reliably measured
Would you say that there is no metric to find out if someone is unemployed? You find out if someone is happy the same way – you ask them. Is unemployment data perfect? No. Can we still scientifically investigate unemployment? Of course. Many economic statistics are harder to gather than happiness statistics are – there is no black market in happiness.
one of the countless moral hazards of happiness-maximization as the primary guiding principle of government
I did not assert it should be the primary guiding principle of government. I asserted that it should not be ignored, and asked what should take precedence over it. I have received few coherent answers so far. I’m waiting.
If wealth redistribution had absolutely neutral effects on everything else – the economy, income mobility, etc… would you support it solely on the basis of happiness?
Depends on what you mean by wealth redistribution. Were Bush’s tax cuts wealth redistribution? I would support changes to tax policies if they made an overwhelming majority of people happier with no ill effects on other things.
Would you support a change in the tax code that made most people less happy, but had no other effect? If not, why not?
If they did, wouldn’t they be pursuing it just as hard as they could?
Who isn’t? Does the fact that people might be pursuing a goal mean that the government should ignore the effects its policies have on them reaching it?
Let’s make it more personal, then: what makes felix happy, and is he pursuing it with top priority? What would happen if you got it?
Felix,
I did not assert that the study of happiness is unscientific. I did say that presuming the state of the science to reliably predict outcomes is absurd, which it is. If you still maintain it is completely predictable, I invite you to start a commune or something to demonstrate the infalliability of this science of living before you subject it on millions of people. In fact, you’d probably maximize happiness this way, as no one who thought you were completely insane to presume to know what would make everyone the happiest wouldn’t be forced to live your way.
Can we scientifically investigate happiness? Of course, I’m happy that we do! But do not begin to imply that unemployment statistics are as subjective and messy as the quantification of happiness.
How do you measure one persons happiness relative to another persons? If that doesn’t strike you as one of the most enormous and challenging questions you can ask, and you figure what people tell you in a survey is “close enough,” you are not taking this seriously enough to take on the responsibility you seem to want so badly.
Of course not. And I would not support a policy that would make people happy solely on that basis either. There are far better principles – liberty, justice, equality under law, just to begin – that should be the focus when discussing what the government should or shouldn’t do. Those principles reflect the realities of the messy and dangerous business of democracy and government, not a fantasyland where the government can maximize happiness through some farcical happiness/unhappiness analysis.
I don’t think choosing happiness as a principle helps us about talk about government policy – it is too subjective, to confusing, and just generally difficult on an emotional, philosophical and logical level.
Felix,
I did not assert that the study of happiness is unscientific. I did say that presuming the state of the science to reliably predict outcomes is absurd, which it is. If you still maintain it is completely predictable, I invite you to start a commune or something to demonstrate the infalliability of this science of living before you subject it on millions of people. In fact, you’d probably maximize happiness this way, as no one who thought you were completely insane to presume to know what would make everyone the happiest wouldn’t be forced to live your way.
Can we scientifically investigate happiness? Of course, I’m happy that we do! But do not begin to imply that unemployment statistics are as subjective and messy as the quantification of happiness.
How do you measure one persons happiness relative to another persons? If that doesn’t strike you as one of the most enormous and challenging questions you can ask, and you figure what people tell you in a survey is “close enough,” you are not taking this seriously enough to take on the responsibility you seem to want so badly.
Of course not. And I would not support a policy that would make people happy solely on that basis either. There are far better principles – liberty, justice, equality under law, just to begin – that should be the focus when discussing what the government should or shouldn’t do. Those principles reflect the realities of the messy and dangerous business of democracy and government, not a fantasyland where the government can maximize happiness through some farcical happiness/unhappiness analysis.
I don’t think choosing happiness as a principle helps us about talk about government policy – it is too subjective, to confusing, and just generally difficult on an emotional, philosophical and logical level.
Ah, crap, sorry about the double-post. And I had gone so long without doing it! Drat!
Let’s make it more personal, then: what makes felix happy, and is he pursuing it with top priority? What would happen if you got it?
Satori?
If you still maintain it is completely predictable
Not completely predictable, but neither are other economic outcomes. We still (rationally) make decisions based on expectations, though. If we raise tax rates to 99.9%, the result is not completely predictable with certainty, but we still trust models enough to know the likely outcome.
How do you measure one persons happiness relative to another persons?
Why would you need to? I can tell you whether I’m happy or not. I can tell you whether I was more happy last year than this year. Most coherent people can do the same. That is all that is needed, unless one believes, “People don’t really know if they are happy or not”, which I find to be an absurd concept.
Of course not. And I would not support a policy that would make people happy solely on that basis either. There are far better principles – liberty, justice, equality under law, just to begin
Under your assumptions, both policies would be equally just, etc. If you felt that one tax policy was more “just” than another, and you also knew, with certainty, that it would cause most people to become more unhappy, would you still advocate enacting that policy?
More specifically, why do we pursue liberty, justice, and equality under the law? For what goal? If increasing equality under the law made everyone involved completely miserable, would you still want to do it?
I don’t think choosing happiness as a principle helps us about talk about government policy – it is too subjective, to confusing, and just generally difficult on an emotional, philosophical and logical level.
I disagree. First of all, its too important of a subject to ignore. Secondly, economics deals with subjective topics all the time – no one thinks it odd that we ask consumers their assessment of current economic conditions or their economic expectations of the future. To the extent that we can find out the relationships between government policies and the happiness of the people living under those governments, those relationships should be taken into consideration. This should be obvious. “Governments don’t exist to make people happy” is not the same as “Governments shouldn’t care whether the effect of their policies is to make people unhappy”.
Felixrayman you aren’t making any sense to me:
You ask a very theoretical question and I provide a very hypothetical answer. Your theoretical question asked about extreme concentration of wealth (which does not exist in the US according to the DeLong graph you link) and I provided a hypothetical answer. The fact that moderate concentration of wealth such as is found in the actual US does not correlate closely to GDP growth one way or another doesn’t effect my answer. It also doesn’t speak to the fact that extreme economic measures to dramatically ‘correct’ for wealth inequality could very well have growth implications. My life expectancty HYPOTHETICAL is not beside the point, because it illustrates the kind of extreme wealth inequality that would be necessary for me to think it was a big deal. Honestly you shouldn’t bother asking questions if you don’t want people to answer them.
Nous:
Is education tied to extreme wealth at the levels we are talking about? I don’t know that is actually a given. And what is tax the upper 10% ‘more’? Are we talking a one percent increase or Swedish levels of confiscation?
Back to felixrayman:
This is like saying that basic non-organic chemistry is scientific and can make accurate predictions therefore neuroscience is scientific and can read minds. They share the scientific method but they don’t share the same level of predictive power. No black market in happiness? I strongly suspect that the illegal drug market could be framed in precisely those terms.
The happiness studies suffer a number of huge flaws:
A) they are subject to nostalgia bias–the things that irritated you 20 years ago aren’t in the forefront of your mind while the things that pissed you off yesterday are.
B) there isn’t an easy quantum of happiness to compare across time.
C) Related to B) “happy” is not a binary state like “employed”. Saying that someone is ‘happier’ doesn’t tell me how much happier he is. Saying that people would be ‘happier’ with less income inequality doesn’t tell me enough to make the statement useful. Would completely leveling income inequality make some as much happier as giving him a cookie every other day? If so, I would rather go with the cookie than try an experiment by changing the economy drastically enough to extinguish income inequality. My thought on that probably holds up to the level of happiness most people get from having children that they are proud of–and I strongly suspect that the marginal income inequality effect is nowhere near that.
E) Happiness is a transitory state. Which temporal period are you aiming for? Lots of students would be currently happier if they didn’t have to go to high school. But they (and we) will be happier in the long run if they are educated.
So I don’t claim there is absolutely no metric for talking about happiness. But I will claim that there is not such a strong understanding of the interaction between absolute wealth/relative wealth/happiness to require that we focus on relative wealth to create happiness. If creating happiness is some sort of generalized function of the government which I’m not sure I conceed anyway. My view of the government is that it should facilitate situations where individuals can pursue their own happiness. An envious person will always find something to envy.
You claim that income inequality makes people unhappy. You do not claim that it makes people as unhappy as absolute poverty. You do not claim it makes people as unhappy as denying them a girl scout cookie. You don’t tell us why we should believe that it makes people unhappy enough that the government should shape its policies around concerns about current levels of inequality. You do not explain why we should worry about an economy which produces a 1% that you don’t like when it also produces a 90% that I do like. I suspect it makes me happier to have an economy that functions well (in the sense that working hard and contributing to the needs and desires of other people can allow you to get do well even if it never gets you to the top 1%) for 90% of the population and makes it so that even poor people can have too much to eat, a car and a roof over their heads, even if it makes you unhappy that some really small percentage of people get really really rich and spend money in ugly and ostentatious ways. I suspect that lots of people are made happier because of that (or at least are content enough not to be willing to risk a dramatic change) because if they weren’t something would be done about it.
This is like saying that basic non-organic chemistry is scientific and can make accurate predictions therefore neuroscience is scientific and can read minds.
Funny, I was joking with some guys at work that we should get into Computer Assisted Phrenology, and one guy pointed out that we could do C.A. Palm-reading by simply using a scanner and having a database. Another guy pointed out that that is why we need young employees, because we are too sceptical and cynical.
Cool thread. Very good arguments from all positions. I wish I had the increased child tax credit a few years ago.
Is education tied to extreme wealth at the levels we are talking about?
Not relevant to the question as intended. If the standard is increasing overall wealth (as opposed to redistributing existing wealth) and if raising the overall education level leads to greater overall wealth, would it be proper to tax the most wealthy at whatever level it takes so long as overall wealth increases 5%?
And if that ‘whatever level’ bothers you then what about a tax rate for the top 10% that leaves them with cost-of-living increase only (no net effective gain in wealth)?
If we are going with a single political program that is most likely to increase long term wealth I wouldn’t go for colleges (which are for the most part accessible through the community college systems to those who are ready for them), I would correct the disaster of inner-city schools. And if I were remotely confident that the teachers’ unions wouldn’t squander the money, again, I would be all for increasing taxes to do so.
You ask a very theoretical question
Very theoretical? Nonsense. I asked a general question about what should be done at high levels of inequality – which the US does have now compared with recent decades, the highest inequality since the 1920s. You responded with an assertion (we should trade inequality for higher GDP growth) that makes no sense, as there is no correlation there in past US data. Got anything that actually is consistent with past history, or not?
It also doesn’t speak to the fact that extreme economic measures to dramatically ‘correct’ for wealth inequality could very well have growth implications
Happiness is hard to measure, but you are willing to make policy decisions based on non-existent correlations? Whatever.
they are subject to nostalgia bias–the things that irritated you 20 years ago aren’t in the forefront of your mind while the things that pissed you off yesterday are.
So? We are talking about random samples of large populations across time. Your objection here doesn’t make sense.
there isn’t an easy quantum of happiness to compare across time.
One can make statistical observations over time, and over different societies, the same as one conducts other investigations. The whole “happiness is hard to measure so we should use other criteria to evaluate decisions” theme reminds me of the drunk looking for his car keys where the light is good rather than where he lost them.
Would completely leveling income inequality make some as much happier as giving him a cookie every other day? If so, I would rather go with the cookie than try an experiment by changing the economy drastically enough to extinguish income inequality
And since we shouldn’t take drastic steps (and I agree) that tells us what about taking marginal steps in the right direction? Nothing?
Lots of students would be currently happier if they didn’t have to go to high school
Most high school students (the ones 16 or older) don’t have to go to high school. They choose to.
But they (and we) will be happier in the long run if they are educated.
The government should force an 18 year old to finish high school?
But I will claim that there is not such a strong understanding of the interaction between absolute wealth/relative wealth/happiness to require that we focus on relative wealth to create happiness.
There is enough evidence that a rational person would expect marginal increases in income inequality, at the current levels, to be associated with decreases in happiness for most people.
You don’t tell us why we should believe that it makes people unhappy enough that the government should shape its policies around concerns about current levels of inequality
I’m asking what other considerations should trump happiness, Jonas actually had a few worth considering. I’ll ask you the same thing I asked him, if you could undertake a policy that would make people more equal under the law, and you knew this would make everyone less happy, would you do it?
I suspect it makes me happier to have an economy that functions well (in the sense that working hard and contributing to the needs and desires of other people can allow you to get do well even if it never gets you to the top 1%) for 90% of the population and makes it so that even poor people can have too much to eat, a car and a roof over their heads, even if it makes you unhappy that some really small percentage of people get really really rich and spend money in ugly and ostentatious ways
A straw man argument. Here’s the real argument – if we can have that functioning economy, and have policies that make most people happier, too, why shouldn’t we? If we can enact policies that allow some really small percentage of people to get really really rich and spend money in ugly and ostentatious ways, and also make most other people happier, I’m all for them.
I suspect that lots of people are made happier because of that (or at least are content enough not to be willing to risk a dramatic change) because if they weren’t something would be done about it
I’m sure some people thought the same thing before 1929, which was the last peak in income inequality.
If we are going with a single political program that is most likely to increase long term wealth I wouldn’t go for colleges (which are for the most part accessible through the community college systems to those who are ready for them), I would correct the disaster of inner-city schools
There was a study of schools in Chicago, where there was a school choice program that let freshman entering high school sign up to go to any school in the district. Who actually got to go was decided by lottery. The students who signed up for the program and won the lottery to go to a better school had higher graduation rates than the general school population. So did the students who signed up for the program but didn’t win the lottery and stayed at their old schools. There was no difference between the winners and losers in graduation rates.
Schools matter less than you think.
Another example, the number of books in a child’s home is highly correlated with how well he does in school. Whether his parents read to him is not. Why is that?
Well, pulled that thread out from the death spiral, you boys did.
Happiness can be a rather vague concept, and I’m wondering if we should aim for a society that avoids both overwhelming happiness and overwhelming unhappiness (sort of Slarti’s things that make him happy make him fat and dumb) Though this is rather unthought thru, I’m thinking that you don’t want to aim for happiness per se, but at that balance where people are still willing to strive, but are not so paralyzed that they fight tooth and nail whenever anything threatens what they have. Sort of a Aristotelian theory of governing.
And what is tax the upper 10% ‘more’? Are we talking a one percent increase or Swedish levels of confiscation?
It’s worth pointing out that our society survived near-Swedish levels of confiscation at the top marginal rates just fine 40-50 years ago. In fact, it prospered.
And that was in the Good Old Days of the 1950’s, which Real (Rebpublican) Americans **must** worship.
Your accountants are telling you your S corporation shouldn’t pay dividends to you?
no, they tell me to make the dividend payments proportional to the salary, at a ratio of roughly 1/1 (though they don’t seem to care if it’s more like 3/2). the idea is to keep it from looking like i’m simply using the setup to avoid those FICA taxes. if this means there’s money left in the bank at the end of the quarter, that’s OK – it means i can continue to pay salary if sales slack off.
Well, we’ve moved along a bit since the felix/Phil cage match. Thanks to both of you for steering the conversation toward civility without anyone having to break out the ruler. Thanks also to Anarch for braving the slings and arrows in an attempt to guide the conversation to a more productive discussion.
Interesting questions have arisen. Should the government be tasked with implementing policies in such a way as to maximize the sum of the happiness, or minimize the sum of the squares of unhappiness, or should the government basically not bother itself with such? I’ve heard a couple of opinions, but nothing compelling. Felix has, as I understand it, attempted to make a case that total disregard for happiness is contemptible, and while there’s some ring of truth to that, there’s also a ring of logical fallacy. It’s not an argument that’s going to get me to volunteer to raise my own taxes, that’s for sure.
And that’s really the rub: severe inequality in tax burden is going to meet with the objection of those being taxed the hardest. Drive the tax rates high enough, and you’re going to incentivize those paying the high taxes to spend some money to the end of lightening their own tax load, also known as screwing with the tax code. Like it or not, the upper 10% pay over 65% of the total income tax revenue, and Phil’s observation aside, that burden has grown in the last 40-50 years (it was less than 50% in 1957, for example), not shrunk. And yes, I am mindful that such a disparity is, in part, due to increasing inequality. Consider there are more factors at play here than simply the upper-bracket rate, for example the aforementioned screwing with the tax code.
Finally, felix’s fixation on income inequality as a significant input to happiness just needs a little more substantiation than the bare assertion that it simply is. I certainly haven’t done everything I can to maximize my own income, and I sincerely doubt that the majority of others have maximized their own household income. Not everyone holds money to be the root of happiness.
Like it or not, the upper 10% pay over 65% of the total income tax revenue, and Phil’s observation aside, that burden has grown in the last 40-50 years (it was less than 50% in 1957, for example), not shrunk.
Not that I can’t find them myself, but do you have the figures handy for total tax burden, as opposed to just income tax? My understanding is that, when adding in state and local taxes, property taxes, sales taxes, and FICA/Medicare, the total contribution to revenue is close to flat across quintiles.
(Courtesy of the WSJ thru Brad Delong) WSJ.com – As Rich-Poor Gap Widens in the U.S., Class Mobility Stalls:
getting rid of the inheritance tax is not going to help the situation.
I woild personally favor a nice flat tax on wealth ((assets – liabilities )* rate) to replace our current tax system.
Like it or not, the upper 10% pay over 65% of the total income tax revenue, and Phil’s observation aside, that burden has grown in the last 40-50 years (it was less than 50% in 1957, for example), not shrunk.
That’s also meaningless unless you include how much the upper 10% makes of the total income.
I did note that as a possible reason, Edward. I’ll try to dig that out, though.
Ok, here it is:
Valid 2002, the upper one percent earned 16% (not a historical high, but certainly up from the mid ’80s) of the nation’s total taxable income, and paid over 33% of the total tax burden. The upper decile earned 42% of the total income and paid 66% of the total tax revenues. The top 95% earned 31% of total income and paid 54% of the total tax burden.
In a larger picture, the upper half of the income distribution earned 86% of income, and paid 96.5% of income taxes.
Interesting statistic, though: fewer than thirteen hundred people pay one-sixth of all federal income tax revenue.
” which the US does have now compared with recent decades, the highest inequality since the 1920s.”
Once again you retreat to relative rather than absolute statistics. The United States is not dramatically unequal in my view. I told you what I thought dramatically unequal would look like earlier but you dismissed it as irrelevant.
The fact that the top 0.1% is a group which is really really rich and really really difficult to get into doesn’t bother me because being that rich still doesn’t buy you 300 years of life while the rest of us have to make do with just 70. It doesn’t bother me because it is possible to live in the bottom quintile and still have a house, a cell phone, a television and a working car–not to mention not having to worry about actual indicators of poverty like starvation. It doesn’t bother me because very few people who desire to learn and better themselves are really stuck in the bottom quintile and get get out–opportunities for advancement to the middle class are readily available if you are willing to take them.
Income inequality as a ‘problem’ is both difficult to correct without drastically changing the way our economy works, and also a very indirect way of going after problems. There are dozens of major initiatives that could make people ‘happier’ that have nothing to do with income inequality and would, I strongly suspect, make them much happier than dealing with income inequality. Ending the drug war. Helping elementary education. Allowing smoking in California bars. I strongly suspect that all three would make people at least as happy in the long run as trying to seriously tackle income inequality–and I don’t even like smoking.
Income inequality is just not the big deal that you or edward seem to think. Lots of people live really happy lives even though they are poor and they have contact with much richer people. Lots of people are really miserable even though they are the richest people in their area and have very little contact with richer people. There are lots of things in the world that are more closely related to happiness than low income inequality.
“There was a study of schools in Chicago, where there was a school choice program that let freshman entering high school sign up to go to any school in the district. Who actually got to go was decided by lottery. The students who signed up for the program and won the lottery to go to a better school had higher graduation rates than the general school population. So did the students who signed up for the program but didn’t win the lottery and stayed at their old schools. There was no difference between the winners and losers in graduation rates.”
What do you think this shows? I think it shows that a desire for changing schools shows a commitment for education which is more important than school quality. That is rather different than hinting that school quality doesn’t matter. That is very different from the idea that school quality doesn’t matter for more borderline cases.
Income inequality is just not the big deal that you or edward seem to think.
Are you arguing then that the wealthiest should not have to pay as much in taxes percentage-wise as the modestly wealthy? You seem to be missing the essence of what’s happening, Sebastian. It’s not that the rich are not being soaked…it’s that they’re getting away with robbery.
“Taxes”. Not FICA, all taxes. As the link I supplied clearly shows, Edward, the top percentile pays 7% more of their AGI in federal income taxes than does the top decile. I suspect that what this article you’re quoting is concluding is, surprise, surprise, the middle classes are getting shafted because the SS cap essentially ensures that the top percentile are paying just slightly more than 0% of their income in SS, while the bracket they’re being compared with is paying the full 6.2%. Factor in sales and state income taxes, and I completely believe that under some circumstances a top earner can pay less in tax, percentage-wise.
But I don’t notice you complaining about Social Security withholdings, which likely account for most of this purported inequity.
In other news, I misplaced a few decimal places in my “interesting statistic” above. Oops. 1.3 million, not 1300.
But I don’t notice you complaining about Social Security withholdings, which likely account for most of this purported inequity.
remove the cap then.
or reinstate the estate tax.
But do something that prevents an oligarchy for God’s sake.
It doesn’t bother me because very few people who desire to learn and better themselves are really stuck in the bottom quintile and get get out-
Inconsistent with the facts. Read the recent NY Times series on class in America for the statistics. Particularly look at the change in time over the ability of people to get out of the bottom quintile, and the small number of people from the bottom quintile that reach the top, and the small number of people from the top quintile that move down much at all. If you accept that being able to leave the bottom quintile is a good thing, why do you accept a decline in the number of people that are able to do so? Do you really believe the number of people “who desire to learn and better themselves” has declined dramatically over the last few decades? That’s nonsense.
It doesn’t bother me because it is possible to live in the bottom quintile and still have a house, a cell phone, a television and a working car
So your idea of what is good for them is better than what actually makes them happy?
Lots of people live really happy lives even though they are poor and they have contact with much richer people. Lots of people are really miserable even though they are the richest people in their area and have very little contact with richer people
Earlier you mentioned wealth as a possible reason we might accept higher inequality, and you gave the justification that the wealth might buy higher life expectancy as an example. Now you are saying wealth doesn’t matter. Your arguments are not even consistent with each other.
They also don’t address the question at hand. Income equality does have an effect on happiness, and government policies do affect this, and recent government policies have caused income inequality to be at its highest since the 1920s, which, despite “your view”, was in most people’s estimation an example of a dramatically unequal society.
I think it shows that a desire for changing schools shows a commitment for education which is more important than school quality. That is rather different than hinting that school quality doesn’t matter
Actually, in the case of those two populations, it showed that school quality did not matter. There was no difference in the populations based on what school they went to. Saying we’ll just “correct the disaster of inner-city schools” won’t work because the problem is not with the schools, the problem is with the people that attend them and their parents.
That’s fine with me, Edward. As an added bonus, it’ll mean more SS benefits for me.
I went to inner-city schools for quite some time, and I can tell you the problem is with all of the above – the schools, the students, and the parents.
Felix, I am really enjoying these tangents!
“Particularly look at the change in time over the ability of people to get out of the bottom quintile, and the small number of people from the bottom quintile that reach the top, and the small number of people from the top quintile that move down much at all. If you accept that being able to leave the bottom quintile is a good thing, why do you accept a decline in the number of people that are able to do so?”
Reaching the top quintile isn’t something I’m worried about. I worry when people who start out in the bottom quintile can’t get anywhere else even if they make a strong effort to do so. That isn’t the case.
”
Lots of people live really happy lives even though they are poor and they have contact with much richer people. Lots of people are really miserable even though they are the richest people in their area and have very little contact with richer people
Earlier you mentioned wealth as a possible reason we might accept higher inequality, and you gave the justification that the wealth might buy higher life expectancy as an example. Now you are saying wealth doesn’t matter. Your arguments are not even consistent with each other.”
I don’t understand your objection. My quoted passage is about happiness in the face of inequality. You are attempting to use it against my arguments about absolute wealth. That doesn’t make any sense. I’m beginning to wonder if you make the distinction between to the two at all.
Reaching the top quintile isn’t something I’m worried about. I worry when people who start out in the bottom quintile can’t get anywhere else even if they make a strong effort to do so. That isn’t the case.
It is the case that fewer people move up even one or two quintiles than did ten years ago, and ten years ago it was true that fewer people moved up even one or two quintiles than did ten years before that. Unless you believe that the number of people “who desire to learn and better themselves” has been declining for decades, then by your metric things are getting worse.
I don’t understand your objection
Your assertion that people live happy lives even though they are poor is not consistent with your early assertion that wealth, through its effect on life expectancy, would make people better off. You have argued both that we should pursue wealth over happiness as, through increased life expectancy, it will make the wealthy better off, and that it is ok for the poor to be poor and “happy enough”. Won’t they, through decreased life expectancy be worse off using your earlier standard? Which one applies?
wow, there’s a whole bunch of ships passing in the night, and no one’s using radar.
Let’s return to some general principles:
1. Really gross income / wealth inequality is corrosive in a democracy, because the bottom 90% rightly starts to believe that the country is being managed for the benefit of the 10%. So, even absent any other consideration, it is a proper role of the govt to prevent the creation of an aristocracy.
Estate taxes with, say, a $5 million exemption address this issue nicely. Straight wealth taxes on the living are really hard to calculate (which is why accurate means-testing of ss is impossible). But capital gains is an acceptable substitute.
2. A separate issue is whose wages are going up. Angry Bear argued on June 6 that wages for a huge slice of the country aren’t rising in real terms. So, although the country as a whole may be getting richer, it appears that the vast majority of the increase in income is being captured by a very small slice, already at the very top.
If true, that may represent a failure of our economic system. And the failure may be attributable, in part, to our tax code. It may also be due to federal securities law and federal labor law.
now, it appears that SH is arguing that so long as certain costs are going down (DVDs get cheaper etc.) and so long as most people’s real wages aren’t dropping, then there’s nothing wrong. (if i’m mischaracterizing his argument, i welcome correction.)
not surprisingly, i disagree. I believe that as a society we should closely examine the tradeoffs being made between the total increase in the wealth of the society and the distribution of the increase of that wealth. To be blunt, i wouldn’t mind knocking several percentage points off the growth rate of the income of the very rich, in order to add just a few percentage points to the rest.
Since i’m not a tax expert, i don’t claim to know whether and/or how to use the tax code to achieve such a goal. but the overarching question of the allocation of the benefits of the rising tide should be addressed.
But do something that prevents an oligarchy for God’s sake.
To late. And now the oligarch are working overtime to impose a theocracy upon the rest of us.
When did the American Dream become defined wholely by how much stuff we have? What happened to “Life, liberty and the pursuit of happiness”?
Working at a job that is, at best, something you don’t actively loathe…for a wage that enables you to buy a Blackberry but doesn’t allow you to plan confidently for your kids’ education, your own retirement, or even a decent vacation every year…for a company you don’t dare leave because you’ll lose your health insurance… and you’re always one layoff, one merger, away from losing even that ambiguous security…in a city where the green spaces are being replaced by office towers, monumental shopping malls, and maximally-crowded high-density residences… but which still can’t fully fund libraries, parks, schools and community centers, much less food banks, public health and housing assistance…
… and it’s not going to get better because the things that would make it better – investment in the commonweal; investment in real education as opposed to glorified voc-tech; a salary that enables you to get off the gerbil wheel and employment that gives you enough time off to do something meaningful with your life besides work – are no longer considered worthy, or even legitimate, national priorities.
To accept the plutocratization of America on the basis that even the working class can buy lots of stuff is… well, it’s a pretty damn sad end to the Great Experiment. I think the Founders were prepared for almost every extingency except the one where Americans decided to sell their birthrights for a mess of consumer electronics.
CaseyL,
Did you catch the link to the “Commodity Fetishism” post from Savageminds.org that Bob McManus provided above?
Have you checked out “A Consumer’s Republic: The Politics of Mass Consumption in Postwar America” by Lizabeth Cohen?
Thought you might find this of interest, Edward, though you may already have seen it: the Gini index 2004.
For a human-language explanation (IANAE):