State of US Household Wealth...

[sheehs1]

Interesting...that....our government and politicians...can make decisions for decades...that lead to what they now call wealth inequality(tongue in cheek)....and I might add...that was highly predictable.....and when things become somewhat "unsustainable"....they target someone else (the top1%,5%). That is part of my take away from this article. The data and the article are being generated....for a reason. I'd be curious...to see population growth numbers, what that growth was attributable to, where that growth ended up in the percentages and whether or not it increased or decreased true percentages in a chart for the same time periods. There are more reasons....than just "stock market investment"...for the inequality of wealth in our nation and I don't think this article tells the whole story. To tell the whole story might have made the article too cumbersome. Who knows? But to draw conclusions from just part of the story....well...is ...typical...of the rhetoric we've been hearing for a while now.

What was interesting to me in this article is that 50% of American households do not own 1 stock. It's probably the same 50% that don't pay any tax. I'm not sure if a household doesn't pay tax...they should even be included in the percentages of wealth generation...except to point out...the large percentage of people the tax paying people are carrying. Perhaps that was the point.

There are other things I could say...but don't think the forum rules allow for it.
Suffice it to say...I'm starting to believe on a purely functional level....we have 2 political systems in the U.S.
(and I'm not talk about Democrats and Republicans )

 

[Walt34]

Feeling poor? This site will make you feel better. It compares your annual income with the rest of the world's. Even someone with a $10k income is still in the top 13%:

Global Rich List

Someone on welfare in the U.S. is still better off than the majority of the world's population.

 

[Independent]

Which is more important:
- The objective level of comfort experienced by the poor, or their perception of their condition as compared to the wealthy?
- The actual reasons that the poor are poor, or their perception of the reasons?

There are a growing number of newly unemployed authoritarian rulers who would take exception to your observation that wide distribution of cell phones and internet-linked computers will reduce the likelihood of unrest.

I'm not sure that wealth distribution is a key factor in civil harmony. It's likely more important that people believe they have a real chance to improve their situation ("I can get ahead in this world if I make good decisions and work") and a perception that they've got something to lose if things get ugly.

Yes. Perceptions count.

In the US, we've historically been okay with wide disparities in wealth because people believed we had a "fair" society. If you worked hard and followed the rules you could achieve an okay standard of living that included the likelihood that your children would do even better. If you worked really hard and got a little lucky, you could be one of those at the top.

(I've quoted an 1831 essay from John Adams that shows this attitude has been around for a long time.)

Now we have lots of people who feel they are worse off then their parents, even though they worked hard and followed the rules. I don't think we're anywhere close to armed revolution. But, I don't think we've seen the worst of the economic results yet. I think our contentious and disfunctional politics are somewhat driven by this feeling that following the rules doesn't get you where you want to go.

 

[engprodigy]

Entitlements have done a lot to screw with perception.

I'd be shocked to discover a large % of people that have played by the rules and worked hard that have been screwed by the system and are living in near poverty...

 

[sheehs1]

I don't know guys...I just don't know. I'd say the top 50% of taxpayers paying for everyone ...is what is unsustainable. The ones with the money will have to probably give more....BUT...everyone is going to have to take less.... in entitlements...including...the bottom 50%...to make anything work. It isn't going to work to just throw money at it. The problem doesn't go away or isn't solved that way.

 

[Hamlet]

I wish people would stop omitting the word "income" from the phrase "50% that don't pay any income tax".

Between FICA, sales tax, property taxes, sin taxes, user fees, etc, the bottom half of this country does pay a significant amount of tax. FICA makes up 36% or so of Federal tax revenue, so it isn't an insignificant portion of the total tax base.

Note also that it isn't uniformly the bottom 50% that doesn't pay income taxes. People who have worked the deduction game particularly well can make $80k+ and end up paying no income taxes in some years.

What was interesting to me in this article is that 50% of American households do not own 1 stock. It's probably the same 50% that don't pay any tax. I'm not sure if a household doesn't pay tax...they should even be included in the percentages of wealth generation...except to point out...the large percentage of people the tax paying people are carrying. Perhaps that was the point.

 

[engprodigy]

All the "poor middle class stuff" in the media of late is pretty ridiculous if you actually look at the numbers:

The middle 20% average 60k in income.

As a group they receive 13% of all income and pay 9% of all taxes.

It truly is an absurd practice to compare the top 1% to the middle 20%, or the middle 50%, or even the top 25%...

Why would you compare outliers to those within 1 std deviation?

I really want to know how the middle class is getting squeezed...

 

[engprodigy]

Between FICA, sales tax, property taxes, sin taxes, user fees, etc, the bottom half of this country does pay a significant amount of tax. FICA makes up 36% or so of Federal tax revenue, so it isn't an insignificant portion of the total tax base.

Considering all of the taxes you just mentioned are paid by the top 50% as well (in larger quantities) I would be surprised how significant the tax contributions are from those paying 0 income tax...

 

[Hamlet]

This is key. I don't think people mind when someone becomes vastly wealthy because of real inovation that improves things. I don't begrudge Steve Jobs most of his wealth (outside of his backdating options money).

I do take issue with the fortunes that people at the top seem to be able to generate from failure. Bob Nardelli walked away from Home Depot with hundreds of millions of dollars. I could have run the company into the ground as well as him. A large portion of the financial industry has gotten rich playing "heads I will, tails you lose".

I think that people want a sense of fairness from the system. I make half what my Dad makes because he works at least twice as hard. I don't begrudge him that money. I would not trade places with him to get it.

I begrudge the Bob Nardellis of this world their money though. They aren't producing wealth, just siphoning it off.

And I would add that there is the perception the system is not rigged against them in their quest to improve their situations. A fact that lately, many may be questioning...

 

[ERD50]

I wish people would stop omitting the word "income" from the phrase "50% that don't pay any income tax".

Between FICA, sales tax, property taxes, sin taxes, user fees, etc, the bottom half of this country does pay a significant amount of tax. FICA makes up 36% or so of Federal tax revenue, so it isn't an insignificant portion of the total tax base.

It would be interesting to see some numbers to put a range on "significant". We can also argue that since low wage earners get a much better 'return' on their FICA, that isn't too bad.

Note also that it isn't uniformly the bottom 50% that doesn't pay income taxes. People who have worked the deduction game particularly well can make $80k+ and end up paying no income taxes in some years.

I've experienced that. Yet, I still paid property tax, sin tax, sales tax, DW paid FICA.... But that has been one year (near zero) out of 30+ years.

-ERD50

 

[eytonxav]

I'm not sure that wealth distribution is a key factor in civil harmony. It's likely more important that people believe they have a real chance to improve their situation ("I can get ahead in this world if I make good decisions and work") and a perception that they've got something to lose if things get ugly.

I am really concerned about the younger generation (my kids included) growing up in an America today that provides less opportunity than the one most of us grew up in. Unless we can improve the jobs outlook, I suspect there will be a rise in civil disharmony.

One other analogy which is interesting to look at in terms of wealth disparity is the income of average workers vs CEOs over the years. When I went into the workforce (1970s), I would guess there was maybe a 25X difference, but today its probably 250X or more. Also, back then if you as a CEO laid off your workforce that was viewed as failure, now they get bonuses and high fives for doing that. While this is purported to be a matter of survival in the global marketplace, it would seem that greed to some extent played a role in diminishing opportunity for the masses?

 

[sheehs1]

I wish people would stop omitting the word "income" from the phrase "50% that don't pay any income tax".

Between FICA, sales tax, property taxes, sin taxes, user fees, etc, the bottom half of this country does pay a significant amount of tax. FICA makes up 36% or so of Federal tax revenue, so it isn't an insignificant portion of the total tax base.

Note also that it isn't uniformly the bottom 50% that doesn't pay income taxes. People who have worked the deduction game particularly well can make $80k+ and end up paying no income taxes in some years.

Well......I can't slice and dice every little word. I think most knew what I meant within the context of what I was writing. Yes...I meant "INCOME TAX". That's the only tax where some pay and others do not...that I can think of ...off the top of my head.
I don't know many that can play the deduction game you mention that make $80,000 and pay zero income tax. Even my daughter ...working full time this year and showing about $43,000 in income paid $7,300 in taxes (no itemization). With W2's and 1099's you can not hide your income. Meaning ..it's fairly straight forward.

 

[samclem]

I am really concerned about the younger generation (my kids included) growing up in an America today that provides less opportunity than the one most of us grew up in. Unless we can improve the jobs outlook, I suspect there will be a rise in civil disharmony.

One other analogy which is interesting to look at in terms of wealth disparity is the income of average workers vs CEOs over the years. When I went into the workforce (1970s), I would guess there was maybe a 25X difference, but today its probably 250X or more. Also, back then if you as a CEO laid off your workforce that was viewed as failure, now they get bonuses and high fives for doing that. While this is purported to be a matter of survival in the global marketplace, it would seem that greed to some extent played a role in diminishing opportunity for the masses?

People aren't any greedier today than in the past. What we're seeing is the market at work. In the 50s and 60s labor was in short supply in the US as our industry expanded after the war to feed worldwide demand. Businesses didn't pay workers a lot because they were kind or benevolent, they paid them a lot because they had to in order to get solid workers in a tight market. Today our workers are competing against workers from around the world who get paid very little per hour. Our workers, even those with minimal skills, still get paid a lot compared to the rest of the world, but this will go down unless we re-cultivate some important relative advantages (lower tax rates, better "treatment" of capital, education that equips people to think critically and function in the work force, etc). Regarding the rise of CEO pay, we've got structural problems that serve to distance those who own public companies (stockholders) from those who run them (CEOs), and this is part of the reason for higher CEO pay. Lower worker pay and higher CEO pay are due to entirely separate dynamics, and to pile them together and determine they are related and evidence of a change in human motivations (greed) is probably not accurate.

 

[LARS]

Someone on welfare in the U.S. is still better off than the majority of the world's population.

Unless adjusted for cost of living, the income comparison is only modestly interesting at best.

Put another way, I'd much rather have $10,000 and live in say Vietnam, than have the same $10,000 and live in the US. No question.

 

[hakuna matata]

It would be interesting to see some numbers to put a range on "significant". We can also argue that since low wage earners get a much better 'return' on their FICA, that isn't too bad.
-ERD50

http://www.itepnet.org/whopays3.pdf

I stumbled across this and it might have the answer you are seeking. I was actually surprised at how Washington (my home state) ranked in terms of the poor -- we are the worst place to be if you are poor! Interesting .pdf nonetheless. Have fun!

 

[eytonxav]

People aren't any greedier today than in the past. What we're seeing is the market at work. In the 50s and 60s labor was in short supply in the US as our industry expanded after the war to feed worldwide demand. Businesses didn't pay workers a lot because they were kind or benevolent, they paid them a lot because they had to in order to get solid workers in a tight market. Today our workers are competing against workers from around the world who get paid very little per hour. Our workers, even those with minimal skills, still get paid a lot compared to the rest of the world, but this will go down unless we re-cultivate some important relative advantages (lower tax rates, better "treatment" of capital, education that equips people to think critically and function in the work force, etc). Regarding the rise of CEO pay, we've got structural problems that serve to distance those who own public companies (stockholders) from those who run them (CEOs), and this is part of the reason for higher CEO pay. Lower worker pay and higher CEO pay are due to entirely separate dynamics, and to pile them together and determine they are related and evidence of a change in human motivations (greed) is probably not accurate.

Its hard to argue with the forces of the marketplace, but to some extent, corporate leadership (and our politicians) in this country have to take some responsiblity for the outsourcing bandwagon it jumped on back in the 90s vs not cultivating back then those important relative advantages that you noted or other strategies that could have improved or at least preserved U.S. prosperity. Its similar to our dependence on foreign oil, a lot noise is made, but things never change as we put off the hard decisions for a later time and generation to resolve.

Now we are in a land of diminished opportunities, political gridlock and dependency on an entitlement based system and must reinvent ourselves. While I try to be optimistic that we can turn all this around, it sure appears like we have cooked up a recipe for disaster for the younger generation. Of course greed did not play a role in any of this.

 

[Hamlet]

All of the taxes I mentioned are regressive. As a group, the poor tend to pay a larger percentage of their income on them than the wealthy do. The progressive nature of the income tax is the only thing making the system even remotely fair.

FICA is neglible to someone making a million/year, because 90% of their income is exempt from it.

It is a huge drain on the production of the working poor, however.

Considering all of the taxes you just mentioned are paid by the top 50% as well (in larger quantities) I would be surprised how significant the tax contributions are from those paying 0 income tax...

 

[Hamlet]

The deduction game generally doesn't get most people to zero, but for alot of people it gets them down below what your daughter pays.

Your daughter with nothing to itemize ends up subsidizing a lot of the deductions.

My wife and I put 33k into our 401ks. We paid 7.5k or so in deductible mortage interest, got a 1.5k credit (the equivalent of about a $5k deduction) for replacing our furnance. We deducted 2.5k for property taxes and about 7k in state income taxes. We gave about 3k away to charity. We get the personal exemption that everyone gets of about 7k. We also got the $800 making work pay credit, which is the equivalent of about a 2.5k deduction

So roughly $67k of our income is exempted from Federal income taxes, and we haven't even worked at it. We also don't have any of the deductions for children yet.

Our Federal taxes end up being less than 10% of our gross income.

Well......I can't slice and dice every little word. I think most knew what I meant within the context of what I was writing. Yes...I meant "INCOME TAX". That's the only tax where some pay and others do not...that I can think of ...off the top of my head.
I don't know many that can play the deduction game you mention that make $80,000 and pay zero income tax. Even my daughter ...working full time this year and showing about $43,000 in income paid $7,300 in taxes (no itemization). With W2's and 1099's you can not hide your income. Meaning ..it's fairly straight forward.

 

[Free To Canoe]

What I thought noteworthy was the Wealth - Racial ratios in Table 5. It pretty much shows no significant trend in the black to white ratio. I expected to see some black improvement since 1983 due to across the board barrier reductions. Perhap the above average gains for the top 1% (mostly white) cancelled out gains in the lower percentages?

 

[engprodigy]

7% vs 40+% that the "wealthy" pay...

I still don't see the comparison or how the middle class is getting squeezed, mistreated, etc.

Everyone should be paying some taxes, otherwise how could they possibly be an informed voter, they have no idea what their decisions cost the people of the country.

Giving certain groups a free pass on taxes is part of the problem with the entitlement mentality and perception of some in this country.

Luckily taxes are a PERCENTAGE so everyone SHOULD be able to pay their share...

 

[MasterBlaster]

I still don't see the comparison or how the middle class is getting squeezed, mistreated, etc.

The middle class is being squeezed by housing, medical, and higher education costs, and increasingly... debt service. The ticket to "the good life" just keeps costing more.

For the middle class the total tax bite including federal and state taxes, property taxes, FICA taxes, sales and other taxes have never been higher. It is not comparable to very high income individuals but still significant considering what else need be funded.

 

[engprodigy]

The middle class is being squeezed by housing, medical, and higher education costs, and increasingly... debt service. The ticket to "the good life" just keeps costing more.

Well then perhaps what they have defined as the good life needs to be redefined.

Perhaps you can't have a mcmansion, private schools, the latest gadgets, new cars, etc on a 60-100k salary...

Where is it written what level of comfort the "middle" class is entitled too, I guess I'm unaware of what people are entitled too....

In my mind you aren't entitled to anything...you do your best, work hard and live a lifestyle based on your income.

Since when are all these things guaranteed that it is so hard for middle class people to afford now?

I'm positive all middle class families can afford the necessities, it is the absurd idea of what the "necessities" are that has some people confused.

For the middle class the total tax bite including federal and state taxes, property taxes, FICA taxes, sales and other taxes have never been higher. It is not comparable to very high income individuals but still significant considering what else need be funded.

I doubt that.

Considering that income taxes are very low now compared to historically...

And property tax and sales tax can be controlled... again perhaps the mcmansion isn't right for a 70k salary.

The middle 20% make 13% of income and pay 9% of taxes...

 

[Mulligan]

All the "poor middle class stuff" in the media of late is pretty ridiculous if you actually look at the numbers:

The middle 20% average 60k in income.

As a group they receive 13% of all income and pay 9% of all taxes.

It truly is an absurd practice to compare the top 1% to the middle 20%, or the middle 50%, or even the top 25%...

Why would you compare outliers to those within 1 std deviation?

I really want to know how the middle class is getting squeezed...

Now I'm not a blame it on the rich or the middle class is getting abused type person, but average taxpayer income adjusted for inflation is $33,000 unchanged from 1988. We do know government reported inflation and real life inflation are a little different. As previous poster said, educational, housing, medical costs have went up higher than that reported rate for years. Throw in the "new" middle class bills that weren't around in the 80's such as Internet, computers, and cell phones the squeeze is there on the monthly budget.

 

[samclem]

As previous poster said, educational, housing, medical costs have went up higher than that reported rate for years.

An interesting point. What's likely causing the excess inflation in these areas you cite?
Higher education: More than $100 billion in federal (or federally backed) student loans each year. That's ten times the amount of private loans. Pumping in government money drives up the price of products and services.
Housing: Fannie and Freddie: Need we say more? Pumping in government money drives up the price of products and services.
Medical costs: 45% of all spending on health care comes from the government. Pumping in government money drives up the price of products and services.

So, maybe we can reduce some of the major causes of inflation by the same method we will reduce the tax "bite"--by reducing government expenditures.

 

[engprodigy]

Absolutely samclem.

You would be hard pressed to find an example of a government interfering and making things better.

A comparison of the middle 20% from 50 years ago to now would probably open some eyes. There is a very weird perception (mostly being contrived by those with an agenda) that the middle class is getting boned today when in reality the comfort level is probably much higher...

There are plenty of people with an agenda that would love nothing more than to somehow convince as many people as possible that they "deserve" more and that the rich are taking it away from them.

I really am curious I guess...

If you are someone that believes the wealth inequality is getting out of hand, what SHOULD the distribution be?