Taking what you don't need...

[timo2]

Here's my take on the growing income/wealth gap: We are paid for what we produce, not for how hard we work. .

That is how it is supposed to be. However, the argument on the other side is that people are more productive now, but the benefit of that increased productivity is not going to them. It going to others. And when people get sick of not getting a decent cut of the benefits of their productivity, that is when civil unrest will greatly increase...or so the theory goes.

One could make the supposition that the whole middle class construct was to keep a lid on class unrest like what occurred in the late 19th and early 20th Century. Letting the middle income group slip away by not including them in the benefits of the increased productivity is a recipe for future trouble, if one looks at history.

It's not that painful to throw people a bone now and then, is it?

 

[samclem]

There's not some sort of ruling cabal that determines what people get paid. "Labor" is like any commodity, and it is subject to supply and demand. If there are a lot of people who can dig ditches, and the demand for hand-dug ditches is fairly low, then that particular activity won't generate a high hourly rate. But if there are very few people who can hit .400 against major league pitching, and a lot of people want to pay to see a hitter do that, then the person who can hit .400 can expect to get paid well.

There's nobody to throw anybody a bone. A heart surgeon is worth a high hourly rate because he has skills that are in demand and there aren't a lot of heart surgeons.

A person's labor, like anything else, is worth exactly what the highest bidder is willing to pay. Not more, not less.

 

[Independent]

I'll try to get into this before Porky shows up.

Yes, US surgeons make more than US ditch diggers because the supply/demand ratios favor surgeons.

At the same time, US surgeons make more than European surgeons because US gov't policies allow the surgeons to restrict the number of new entrants. And, because the US health financing system (driven by gov't tax policies) insulates most patients from the actual cost of surgery.

It's not all about supply/demand, it's also about gov't policies.

Yes, a successful movie can make more money because there's a bigger worldwide market. But, 70 year copyrights shift money from ordinary people to heirs of creative people. And those copyrights are gov't laws.

I could say similar stuff about strong dollar policies, immigration laws, and regulatory apathy as well.

So gov't policy puts a thumb on "market" income.

Then, once the market income has been earned, the gov't taxes it. Yes, average tax rates are higher in the upper quintile. If you look at the top 400 taxpayers, rates go back down. That's the effect of lower rates for capital income. That's an obvious place where we seem to be compounding the market effect by favorable deals for the wealthy.

How about step-up on basis at death? That's something else I would change.

(BTW, the CBO statistics on distribution of total taxes assume that capital bears all (or most) of the cost of corporate income tax. That doesn't seem true to me in a world where capital can jump international boundaries at the click of a mouse.)

To me, even though some real technological changes lead to more extremes in supply/demand results than in the past, we're compounding that effect with gov't policies.

 

[Independent]

More of same ...

I think much of this is cultural. In the Depression, some people at the top of the economic heap were truly concerned that the US could go socialist. It was better to support gov't policies that shared the wealth than to lose it all in revolution.

In WWII, we all had to be in this together. In the Cold War, we needed to show that Capitalism wasn't just good for the capitalists, but also for the workers. Influential people who felt that way influenced gov't policies to even out the results.

Those days are over. Now it's glorious to be rich. The people at the top appear to believe that all their success is solely the result of their extraordinary efforts, and they deserve more than they're getting now (the Ayn Rand attitude). That shows up in how hard they push on gov't policies.

 

[samclem]

At the same time, US surgeons make more than European surgeons because US gov't policies allow the surgeons to restrict the number of new entrants. And, because the US health financing system (driven by gov't tax policies) insulates most patients from the actual cost of surgery.

It's not all about supply/demand, it's also about gov't policies.

Right. Well, as you say, it is government policies that are modifying both the supply of surgeons (govt restrictions responding to AMA pressure) and demand for services (through government structuring of health insurance and tax policies, which effectively insulate patients from cost considerations and drive up demand by injection of money to purchase this particular service). It's still supply and demand, but skewed by deliberate government policy.

So gov't policy puts a thumb on "market" income.

Yes, that happens. We are apparently unwilling to let the market set prices in all things.

If you look at the top 400 taxpayers, rates go back down. That's the effect of lower rates for capital income. That's an obvious place where we seem to be compounding the market effect by favorable deals for the wealthy.

How about step-up on basis at death? That's something else I would change.

Or, tax cap gains at the "earned income" rate. But the CG would have to be indexed for inflation. Some believe this would be a paperwork nightmare, but with the tools easily available today I don't think so.

To me, even though some changes lead to more extremes in supply/demand results than in the past, we aren't doing obvious stuff with taxes.

Like zero-deductions, everyone pays the same % of all earnings? The rate for everyone would be small, there'd be no government thumb on the scale, and the true burden of government (and the things it distributes) would rest on everyone equally, in direct and constant relationship to their earnings. And, in response to the OP, no earner, no matter their income, will again be cheated out of the opportunity to help others through their taxes.

 

[aim-high]

Those days are over. Now it's glorious to be rich. The people at the top appear to believe that all their success is solely the result of their extraordinary efforts, and they deserve more than they're getting now (the Ayn Rand attitude). That shows up in how hard they push on gov't policies.

Good point. It seems there is more than one entitlement class.

Politically, I'm somewhat hold to classical liberalism. However, the reality is that the field is not level. We are not all equal. Nor are we born into equal opportunity.

I don't believe government intervention is the way to solve that problem. Others do. Good people can see the same problem and have different approaches to solving it.

 

[LARS]

If you really want equality, look to Kurt Vonnegut and his short story: Harrison Bergeron.


http://en.wikipedia.org/wiki/Harrison_Bergeron

 

[haha]

Yes. Well, I hope you'd agree that in this case it is government policies that are modifying both the supply of surgeons (govt restrictions responding to AMA pressure) and demand for services (through government structuring of health insurance and tax policies, which effectively insulate patients from cost considerations and drive up demand by injection of money to purchase this particular service).

Yes, that happens. We are apparently unwilling to let the market set prices in all things.

Or, tax cap gains at the "earned income" rate. But the CG would have to be indexed for inflation. Some believe this would be a paperwork nightmare, but with the tools easily available today I don't think so.


Like zero-deductions, everyone pays the same % of all earnings? The rate for everyone would be small, there'd be no government thumb on the scale, and the true burden of government (and the things it distributes) would rest on everyone equally, in direct and constant relationship to their earnings. And, in response to the OP, no earner, no matter their income, will again be cheated out of the opportunity to help others through their taxes.

This will never happen, the essence of "democratic" government is staying in power by taking from some, and giving to others. In America, the gifts to the wealthy are mostly in the form of regulation and tariffs and agricultural price supports, etc. Pols get campaign donations from this group, pay them off with favors that only well educated cranks can even figure out, and then take taxes from earnings of the upper 45% or so of earners and pay off your lower level clients whose votes you must have in form of cash, food and rent assistance, etc. It goes back at least to Rome, help your allies and hurt your opponents. Both parts are necessary. A government that does not demonstrate its ability to selectively inflict pain on its opponents has not been seen in America in a long time.

Ha

 

[haha]

If you really want equality, look to Kurt Vonnegut and his short story: Harrison Bergeron.


Harrison Bergeron - Wikipedia, the free encyclopedia

Very interesting. We are almost there. I keep thinking, likely hopelessly, that external economic competition that we cannot control will force this handicapping in our own society to lessen. Of course, getting public brainwashing, often called public education, pretty well takes care of those who grow up here.

Ha

 

[photoguy]

There's not some sort of ruling cabal that determines what people get paid. "Labor" is like any commodity, and it is subject to supply and demand. If there are a lot of people who can dig ditches, and the demand for hand-dug ditches is fairly low, then that particular activity won't generate a high hourly rate. But if there are very few people who can hit .400 against major league pitching, and a lot of people want to pay to see a hitter do that, then the person who can hit .400 can expect to get paid well.

Isn't professional sports a bad example given salary caps and luxury taxes? According to an article by NPR, Jame Lebron should be paid more than double what he is getting if weren't for the non-free market caps.

At $17.5 Million A Year, LeBron James Is Underpaid : Planet Money : NPR

I think the point several folks are making on this thread is that there are many distortions to the free market that creates both winners and losers (in a way that some may not consider "fair").

 

[aim-high]

If you really want equality, look to Kurt Vonnegut and his short story: Harrison Bergeron.


Harrison Bergeron - Wikipedia, the free encyclopedia

I'll check it out. The mind only works when it's open. Too many of us come into this kind of discussion with our minds already made up. We don't really listen to what others have to say or we only judge it through our own filter.

I'm not looking for equality. People are not equal and never will be. We all have unique DNA and come to life with different innate abilities and capacities.

The problem is when those of us with expanded capacities use them in ways that are exploitive rather than with compassion and empathy so that everyone has the opportunity to live up to their God given potential.

The systems currently in place (US capitalism / European socialism) along with selfishness, greed, laziness, or a lack of creativity and vision usually lead toward the easy exploitive path rather than the compassionate, empathic one.

I'm not looking to build a utopia or change things at a system level. I try to work within whatever system I'm given and do the best I can to set an example of success and help all those around me do the same.

 

[NW-Bound]

This will never happen, the essence of "democratic" government is staying in power by taking from some, and giving to others. In America, the gifts to the wealthy are mostly in the form of regulation and tariffs and agricultural price supports, etc. Pols get campaign donations from this group, pay them off with favors that only well educated cranks can even figure out, and then take taxes from earnings of the upper 45% or so of earners and pay off your lower level clients whose votes you must have in form of cash, food and rent assistance, etc. It goes back at least to Rome, help your allies and hurt your opponents. Both parts are necessary. A government that does demonstrate its ability to selectively inflict pain on its opponents has not been seen in America in a long time.

Ha

"Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other." - Oscar Ameringer

I think the art is often not so gentle, but we should strive to keep it so.

By the way, upon reading Ha's post, I remembered that I had heard a paraphrase of the above quote, and decided to search for the origin. And so, I learned about Ameringer whom I had not known of.

From Wikipedia:

Oscar Ameringer (August 4, 1870-November 5, 1943) was a German-American Socialist editor, author, and organizer from the late 1890s until his death in 1943. Ameringer made a name for himself in the Oklahoma Socialist Party as the editor of its newspaper and a prominent organizer for the party.[1]His most famous work, The Life and Deeds of Uncle Sam, was a widely-read satire of American history that sold over half a million copies and was translated into 15 languages​

 

[aja8888]

What's this thread about, anyway?

When I went to the local SS office here (first time for me) to see an agent about signing up for Medicare and to look as SS benefit calcs, I thought I was in the wrong office as I was the only "old" person there. There were lots of young children around with their mothers or grandmothers, some middle age men, a few women with tattoos, and a guard at the door. I asked the guard if I was at the wrong place...he grinned and said take a number and have a seat.

The young lady I eventually got to see was very helpful.

Yes, I am taking SS paybacks and will continue to do so, especially after working for 45 continuous years and paying into the system all the way.

 

[Independent]

"Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other." - Oscar Ameringer

Nice quote.

 

[Independent]

Like zero-deductions, everyone pays the same % of all earnings? The rate for everyone would be small, there'd be no government thumb on the scale, and the true burden of government (and the things it distributes) would rest on everyone equally, in direct and constant relationship to their earnings. And, in response to the OP, no earner, no matter their income, will again be cheated out of the opportunity to help others through their taxes.

I've been an above-average earner ever since I changed careers in my late 20's. It has never bothered me to pay higher tax rates than people who have lower incomes than I have. I think the pros of "progressive" tax rates outweigh the cons by a substantial margin.

However, for the same reasons, I think it's good policy that the people who make more than I do also pay higher rates than me.

 

[haha]

"Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other." - Oscar Ameringer

I think the art is often not so gentle, but we should strive to keep it so.

By the way, upon reading Ha's post, I remembered that I had heard a paraphrase of the above quote, and decided to search for the origin. And so, I learned about Ameringer whom I had not known of.

From Wikipedia:

Oscar Ameringer (August 4, 1870-November 5, 1943) was a German-American Socialist editor, author, and organizer from the late 1890s until his death in 1943. Ameringer made a name for himself in the Oklahoma Socialist Party as the editor of its newspaper and a prominent organizer for the party.[1]His most famous work, The Life and Deeds of Uncle Sam, was a widely-read satire of American history that sold over half a million copies and was translated into 15 languages
​

Thanks for posting this. I also noticed from your quoting me, that I had dropped a most important word, "not"--I meant to say: A government that does not demonstrate its ability to selectively inflict pain on its opponents has not been seen in America in a long time.

Ha

 

[packrat44]

And if Warren wants to pay more (instead of just claiming he wants to pay more) I wish he would just send in the check. He knows how to do that. He doesn't want to pay more, he thinks other people should pay more. That's the common theme, isn't it? Warren has found good uses for his money (earning more money, philanthropy, etc) that apparently don't include sending it to the US government. But he thinks "other people" aren't so inherently good as he? Arrogance--or just wanting to gain favor on the cheap. It's not an uncommon trait, but I guess I expected more of "the Oracle"

I agree totally.

 

[samclem]

I've been an above-average earner ever since I changed careers in my late 20's. It has never bothered me to pay higher tax rates than people who have lower incomes than I have. I think the pros of "progressive" tax rates outweigh the cons by a substantial margin. .

I haven't figured out a good solution to the inherent instability/negative feedback problem that occurs when an increasing percentage of the electorate has no "skin in the game" when it comes to taxes, but benefit disproportionately from government spending. It can reach a tipping point and there doesn't seem to be an obvious homeostatic mechanism to bring things back into balance. There have been proposals to address the problem, but discussion of them here will not end well.
Our Constitution (incl the Bill or Rights) includes protections for minorities from the "tyranny of the majority." and we eschew pure democracy (without these protections) for this very reason. There is protection of unpopular minority speech from "mob rule," protection of religious belief, etc. But there is no protection for an individual's possessions, for personal property. To the extent that property is gained by trading away the hours of one's life, it represents their liberty. We don't allow the majority to force the minority into involuntary servitude, but they can be forced to give up property which represents the same number of hours. The same applies to everyone, of course, but at present only about half of people are paying FIT, so the net has already been narrowed considerably. It seems proper that we establish a limit on just how much property any one person owes to the government (i.e. to other people), some basic protection against the actions of the majority. I don't see that in our present system, and I don't see any other mechanism that prevents the many from taking everything from the few.

And since "the few" are likely a disproportionately large number of ER types, this issue is of importance here.

 

[siamond]

<< I didn't read all the discussion, just the first post and a few more, sorry if I repeat what other people said, just expressing my own opinion >>

I contributed to SS, I really don't quite see why I wouldn't reap the benefits of it. Now if (savings/portfolio/SS) is 'too much money', then I'd rather make my own choices on how to spend it. I might redistribute to my heirs, to charities, maybe help a young entrepreneur, etc. At the end, this is re-injecting money in the economy one way or another. Therefore helping the government and social security in my own little way, but... according to MY terms.

FIRE is about freedom (at least in my book). Finding proper ways to redistribute wealth is part of it. And this is a very personal decision.

 

[siamond]

Now, let me digress for one second... In the past few weeks, I did a LOT of modeling of withdrawal strategies, portfolio value and spend trajectories, wealthy situations, painful failures, etc.

Something I hadn't quite appreciated until very recently is that SS (or Pensions) is a nice cushion against the few % of scenarios with a dramatic failure at the end (e.g. retire in years like 1929 or 1965). Not only you have the obvious ultimate protection of having a minimum spend guaranteed every year (albeit small), but if you reinvest your SS income and make it part of your ongoing portfolio (assuming it's still in half decent shape), you actually recover down the road much more gracefully from some of the nastiest situations.

All this to say that I'd rather take SS no matter what, and spread the wealth as I wish (if wealth there is). And benefit from such cushion against extreme market drops.

 

[ls99]

As I did not feel like doing anything useful this morning, instead spent time re-reading this thread.

At post number 193 by Samclem for some reason I thought of the novel by William Golding: Lord of the flies. Sure looks like we are heading the way of the boys trying to create order out of chaos. Instead, just a different form of chaos.

Will there be the space alien ship arriving to restore order to this failed experiment called human race?

 

[Independent]

I haven't figured out a good solution to the inherent instability/negative feedback problem that occurs when an increasing percentage of the electorate has no "skin in the game" when it comes to taxes, but benefit disproportionately from government spending. It can reach a tipping point and there doesn't seem to be an obvious homeostatic mechanism to bring things back into balance. There have been proposals to address the problem, but discussion of them here will not end well.
Our Constitution (incl the Bill or Rights) includes protections for minorities from the "tyranny of the majority." and we eschew pure democracy (without these protections) for this very reason. There is protection of unpopular minority speech from "mob rule," protection of religious belief, etc. But there is no protection for an individual's possessions, for personal property. To the extent that property is gained by trading away the hours of one's life, it represents their liberty. We don't allow the majority to force the minority into involuntary servitude, but they can be forced to give up property which represents the same number of hours. The same applies to everyone, of course, but at present only about half of people are paying FIT, so the net has already been narrowed considerably. It seems proper that we establish a limit on just how much property any one person owes to the government (i.e. to other people), some basic protection against the actions of the majority. I don't see that in our present system, and I don't see any other mechanism that prevents the many from taking everything from the few.

And since "the few" are likely a disproportionately large number of ER types, this issue is of importance here.

I think this has been a major objection to democracy for centuries - "the mob will steal from the wealthy". In 1792, most (maybe all?) of the 13 states restricted suffrage to people with "property". That was their solution. But, they rapidly expanded suffrage. "All men created equal" was hard to ignore.

This note from Madison, written 30 years after the constitutional convention seems to say that he had argued for a requirement that one house of Congress should only represent property owners. However, 30 years later, with expanded suffrage, the feared theft hadn't occurred. Property: James Madison, Note to His Speech on the Right of Suffrage

His explanation seems to be upward mobility. Why should I vote to soak the rich if I expect to become the rich? IIRC, Tocqueville had the same observation (no reference).

I think that's a good point. If people believe that they or their children are likely to be rich, they don't see a benefit in expropriating wealth. I'll guess that the belief in upward mobility is waning in the US, but I don't have data.

Practically, I think most people consider themselves "taxpayers". They pay sales tax, property tax, Social Security tax, Medicare tax, gasoline tax, etc. Those taxes are generally regressive. Only income and inheritance/estate taxes are clearly progressive. I can imagine retirees on SS, paying no FIT at all, still complaining about excessive gov't spending.

I'll agree that I'm opposed to means testing SS, if "means" are defined as "accumulated assets" rather than "lifetime earnings". That's about the only type of "stealing from the rich" that I see as relevant to most of the people here.

 

[packrat44]

When my parents retired they drew their SS benefits. At the time, it looked as though they could live on their investments without the income from SS. They were LBYM type people. Over the years their income was greater than their expenditures. About 5 months ago my father had to enter a nursing home. About 1 month ago my mother had to join him. Their cost for the nursing home is about $7k/month/each - $168k/year for the 2 of them. Plus, they still have the cost of maintenance and taxes on their house. They do not want the house sold because they think they can return and function adequately - not reality.

My father told me a week ago they had hoped to leave an inheritance to all the children but the high cost of nursing care was rapidly diminishing their savings.

Point is, some may think they have more income than they need when they are of the age where they can receive SS benefits. But income and expenditures do not do not remain constant throughout our lives. The only way we will know we have more than we need is when we die there is still money in the pot. A person can set their trust/will in such a way that any excess can be distributed in the best way you see fit, whether that be their children or charities of their choice. Not taking SS benefits so greedy politicians can mishandle the funds is not in my plans.

 

[travelover]

..............
Will there be the space alien ship arriving to restore order to this failed experiment called human race?

Sure, just like the Spanish arrived to save the Incas.

 

[NW-Bound]

While we are on a diversion...

Will there be the space alien ship arriving to restore order to this failed experiment called human race?

Sure, just like the Spanish arrived to save the Incas.

More like this Twilight Zone episode: "To Serve Man".