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Old 06-08-2014, 10:21 PM   #61
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Those who complain the loudest about the inequality of the rich simply want to replace them.
+++++++. Always been true, always will be true. Even the very holy professors who profess to love the poor all know that the lives they lead as intellectuals, being sent to conferences all over the world, getting Sabbaticals are in many ways better than those lived by quite rich business or professional people. And no wealth tax or punitive legislation will target them.

Was the USSR egalitarian? Did the workers have dachas on the Black Sea, or the Politburo members?

Ha
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Old 06-08-2014, 10:58 PM   #62
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I don't think Piketty or anyone else is advocating Communism, but there has to be some point on the continuum where even most posters here would agree things are getting too unbalanced. What if the top .5% owned 99% of the wealth in the world? Would that still be okay with all of you?

What ratio of wealth for the top .1% in the U.S. would be unfair? If they owned 100% and we were all serfs working their land would that be okay? If not where would you draw the line?

Currently the 85 richest people in the world own as much wealth as the bottom half, or as much as the poorest 3.5 billion of the world's population -

http://www.theguardian.com/business/...f-of-the-world

How do you feel about that?
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Old 06-08-2014, 11:02 PM   #63
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Punitive legislation?

When it was suggested that the bush tax cuts, which caused the fiscal situation to deteriorate, to expire as originally planned, there were cries about confiscation, as if a 2 or 3% increase in the highest marginal rates would have made billionaire "job creators" forego additional millions in income because the tax regime was so onerous.

So 39% instead of 36% is punitive?
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Old 06-09-2014, 05:41 AM   #64
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Same is true of not wealthy families. What is your point, other than wealth is bad?

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"The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread."
Anatole France, The Red Lily, 1894, chapter 7 (1844)
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Old 06-09-2014, 07:16 AM   #65
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"The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread."
Anatole France, The Red Lily, 1894, chapter 7 (1844)
That is profound. The quote made me think of the tax benefits of capital gains tax, and how everyone gets the advantage. One fact is that the top 1% get 70% of the tax benefit. I'm also glad to be in the upper quintile where most families reap some advantage. The bottom 4 quintiles do not benefit much at all.
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Old 06-09-2014, 08:56 AM   #66
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... but there has to be some point on the continuum where even most posters here would agree things are getting too unbalanced. What if the top .5% owned 99% of the wealth in the world? Would that still be okay with all of you?
...

How do you feel about that?
I feel it is more about context than numbers.

FYI, I personally have known some very wealthy people, and I didn't for even one instant feel they 'owed' me or anyone else anything.

The context that is important to me is not the number between richest 1% and the rest, but just how poor are the rest, and do they have a reasonable chance to better themselves through hard&smart work?

There are many ways to measure it, but I think one can make the case that the poor in the US are far better off than they were years ago (cell phones, cable, A/C, etc). I'm really more interested in how our poor are doing, than I am worried about how rich Bill Gates or Carlos Slim is.

Correct me if I'm wrong, I have not read Piketty's book but no one has offered up a rebuttal to this - I bolded 'wealth in the world' in your quote, as it seems he concentrates on the middle/lower class in industrialized nations. But it seems that they are taking a hit largely, or at least partially, because less developed countries are getting our jobs. That is good for them and they are very poor. So shouldn't we look at this in a different light, and be glad that the very poor in those places are doing better, even if it costs our industrialized nations a slight hit standard of living (which is far, far better than those other countries)?

And it takes the capital of wealthy people to set up factories overseas. So yes, the wealthy are going to benefit along with the poor in those less developed countries at the same time the middle/lower class here are negatively affected. I'm just not sure this is something we should be 'doing anything' about. There are always consequences.

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Old 06-09-2014, 09:35 AM   #67
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It's not just "wealthy families" that never pay the capital gains tax, it's EVERYONE. Imagine every house that is inherited, every share of stock, etc. It's not just the uber wealthy that benefit, although they obviously benefit more from the sheer $ involved.

However, also don't forget the practicality of this! How do you "force" someone to find the records of a deceased taxpayer to determine the cost basis of a house, or shares of stock that are 30 years old, and have been reinvesting dividends? If they can't find them, do you make them assume it's a zero cost basis and the entire proceeds amount is subject to capital gains tax?

Sure, now there are requirements for brokers to track the data (although I don't know if they transfer the records if you transfer your accounts from one broker to another)....but don't underestimate the sheer complications involved if now everyone had to somehow unearth the records and knowledge of deceased relatives for costs. Not to mention executors filing out the estate tax return, who now suddenly bear some tax liability exposure to determining the correct cost basis - from both the IRS going after them for over-estimating cost basis, as well as heirs going after them for under-estimating cost basis and making conservative assumptions in the IRS' eyes.
We have different views on "everyone".
I'd say that most Americans never pay capital gains taxes on their houses - for a single person, the first $250k of gain isn't taxed.

Most do not own stocks that are subject to capital gains taxes. If they own stocks, it's inside a 401k or some other qualified account, and their heirs pay ordinary income tax.

And, of course, all the money is at the top:
The 3 percent of returns with AGI over $200,000 reported ... 83 percent of capital gains;
the 0.3 percent with AGI over $1,000,000 reported ... 61 percent of capital gains.
Who Pays Capital Gains Tax?

I understand the concern about the small estate, but a $100k deductible would cover most people who have just a "little" taxable cap gain. We could make it $1 million or even $10 million and still tax most of the gains for the truly wealthy.

We expect taxpayers to keep records so that they can calculate a cost basis if they sell when they are alive. The more they have, the better those records will be (the people I'm interested in have accountants for this stuff). I don't see why we'd expect those records to disappear when the taxpayer dies.
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Old 06-09-2014, 09:38 AM   #68
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Same is true of not wealthy families. What is your point, other than wealth is bad?

Ha
This is what I said "I don't think taxes should be used to "punish" anyone. Taxes are just the cost of gov't. But, we have such a huge range in financial results, that it seems to me that the practical result is that we should collect more taxes from the people who did better financially."

I'm not sure how you can get "wealth is bad" out of that.

By all these statistics, I'm far "wealthier" than the average American. I don't think I'm a bad person.
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Old 06-09-2014, 09:42 AM   #69
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I'll add, I've never really understood the value of looking at the wealthy and poor as an 'us versus them' kind of thing.

Let me give some context and personal perspective on this:

Most of my career was spent as an Engineer/Manager supporting electronic product production. So we are talking assembly lines that are a combination of high tech equipment (my area of responsibility), and people doing low-level to mid level assembly, technical support and supervisors.

The assembly jobs would mostly be filled by what would be considered lower/middle class type people. Most were reasonably hard working people, a few slackers (as in any job), a few drifters, and a few really exceptionally concerned and hard working people. I recall of a few of the exceptionally dedicated workers were not what I would call 'bright' - they were very well intentioned and motivated to do well and were a real asset to the company, but I really don't think they could 'hack it' much past a high school degree.

But this assembly line job was a good match for them, they thrived and the company also benefited. So I think of this as more of a symbiotic relationship, than I do the 'rich CEO' versus the workers.

And I distinctly recall walking the line one day when things were going well, and thinking that even though we had a good team at that time, and we were meeting/exceeding goals, if you took the best workers from all the assembly lines/shifts we had - would they have the skills needed to organize and run a factory? No. And they certainly wouldn't have the capital to build a factory. And the CEO and us Engineers would likely make terrible assembly line operators, the company needs low level workers, middle managers, and top level executives. One can't exists w/o the other.

A symbiotic relationship. No need to fight with an us versus them mentality, IMO.

Does it get out-of-balance at some point? Sure, but I'd need to think a bit more to try to define that. But as I said earlier, for me it has more to do with context than numbers.

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Old 06-09-2014, 09:51 AM   #70
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I feel it is more about context than numbers.

FYI, I personally have known some very wealthy people, and I didn't for even one instant feel they 'owed' me or anyone else anything.
I think the issue isn't about Carlos Slim or Bil Gates or any one person having a lot of money. It is an issue of economic metrics of projecting out the current path of r > g.

What ratio of wealth in the world is it okay for the top 1/10 of one percent okay to own? Is 100% okay? 50%? Is it really okay for 85 people to own as much wealth as the bottom of the 50% of the world population, when many of those 50% do not have enough food to eat, access to medical care or access to clean water?

What ratio is okay with you? If 100 people owned 100% of the wealth in the world is that okay with all of you? Would that be capitalism working as it should? Do you have any ratio where you think tax increases to distribute wealth more equally would be okay?
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Old 06-09-2014, 09:59 AM   #71
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Yes. I am not well versed in this area, but would think better laws can protect us here.


Yes. I agree on both points, but wonder if any has suggested a feasible solution. I do not think heavy taxes on all high earners to "punish them" equally will work well.
I responded to this, and picked up on the tax aspect because of the "punish" reference.

But the first half is every bit (maybe more) important. I'd say that our mortgage bubble and resulting financial crisis were the direct result of the finance sector taking risks in a situation where most of the downside would be borne by "somebody else".

We saw how this could happen back in the 1930's, put some laws in place to try to keep a lid on this behavior. The laws worked (I think) until we decided we didn't really need them and failed to update them for changing circumstances.

The "failed" part wasn't just an oversight. It resulted from active promotion of the idea that "regulation stifles innovation", and of course "innovation is always good" (smartphones, you know). I think Volcker was closer to the mark.

So when I see someone like Taleb saying that the increasing incomes of the top 0.1% derive from "innovation", I respond somewhat negatively.
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Old 06-09-2014, 10:17 AM   #72
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A general comment: If we (as a society) believe that a growing income (or wealth) gap is a bad thing and should be addressed, it appears there are two ways to do it:
1) Have the government take money and resources from the rich and give them to the poor.
2) Change the structure of game so that there is more opportunity for a larger number of the less-well-off to earn more money.

Option 1 is simple (simplistic?) and would address the stated problem most directly. But it ignores human nature and the reality of politics: To the degree the government is directly controlling who gets what, people will (rationally) turn to the political process to get what they want.

Option 2 is a more roundabout way to accomplish the goal. But, the focus would be on opportunity for individuals (rich and poor) to advance their own interests by producing things and services of value to others.

And, if it matters, only Option 2 results in a net increase in wealth.
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Old 06-09-2014, 10:31 AM   #73
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...
What ratio of wealth in the world is it okay for the top 1/10 of one percent okay to own? Is 100% okay? 50%? Is it really okay for 85 people to own as much wealth as the bottom of the 50% of the world population, ...
I said earlier, I don't think I can pick a number, it's about context. But I'm going to try to think about that a bit, and see if I can formulate some kind of answer (I don't expect it to be a number though).

I'm reminded of one of my kid's HS graduations. One student won so many awards, they were literally clinking-and-clanking, hanging around her neck, as she walked up to accept the next award. An incredibly bright, motivated, hard-working, well spoken and well liked individual.

Now how much 'wealth' (measured in knowledge, and ability to use that knowledge), do you think she had, compared to the lower 50% of students (and include the ones that never made it to the graduation because they flunked out, and/or maybe even in jail). Is that unfair? And shouldn't we expect her to be able to parlay all that she has worked for into something far above what the average person attains? Don't you think the idea that this hard work can pay off is a motivational factor? I think deciding that some magic number is going to limit you, would also be a disincentive for the lower range to work any harder - someone is going to 'guarantee' that they are at least 1/Xth as well off as the hardest working students, so let's party!


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... when many of those 50% do not have enough food to eat, access to medical care or access to clean water?
Now we are getting to common ground, and again it touches on my issue (unless someone can clarify this), that many of these discussions, including Piketty's book, isn't looking at the big picture - it looks at inequality within industrialized nations. I am far,far more concerned with those w/o clean water and other basics than I m about our definition of 'poor' in the US (cell phones, medicaid, clean water, plenty of food, A/C and central heat, cable, game boxes, etc). And I'm fine with a lowering of US standard of living if it means we can lift those people up.

But I'm afraid that their plight is less about money, than it is about a corrupt government (or other social issues) getting in their way, or even actively keeping them down. We need to define the problem before we can decide that throwing money at it is the solution.

Quote:
What ratio is okay with you? If 100 people owned 100% of the wealth in the world is that okay with all of you? Would that be capitalism working as it should? Do you have any ratio where you think tax increases to distribute wealth more equally would be okay?
Like I said, I don't think the answer is a number. And I don't think we would get anywhere near 100 people owning 100% w/o breaking some other rules that have nothing to do with a number, but about control and opportunity. I've got to go tend to some other things, but I'll see if I can take some time to put some of those other things in a more tangible form.

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Old 06-09-2014, 10:33 AM   #74
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... two ways to do it:

1) Have the government take money and resources from the rich and give them to the poor.
2) Change the structure of game so that there is more opportunity for a larger number of the less-well-off to earn more money.

....

And, if it matters, only Option 2 results in a net increase in wealth.
Well said, and yes, I think it matters!

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Old 06-09-2014, 10:34 AM   #75
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I've been following this thread since it started and it seems to me that there are many people who believe that the 1% somehow all meet in some secret location and, over cocktails and lobster, collectively and consciously conspire to keep the working class under their thumb.

I'll say it again, most 1%ers are part of a revolving door and only stay in the 1% a few years, fall off and are replaced by others. Some got lucky, some worked their butts off, some play by the rules, some don't.

The rich, like the poor, will always be with us. "Income inequality" is today's feel good word-of-the-day but as we've read in other threads, as a collective unit, you can't stop the rich or tax them into submission with the hope that the poor will gain....they have too many options and too many work-arounds.

I'm also a little surprised at the tone of some forum members who claim to be blissfully FI but seem to begrudge--or at least feel guilty about having wealth. What's that about, people?
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Old 06-09-2014, 10:51 AM   #76
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The rich, like the poor, will always be with us. "Income inequality" is today's feel good word-of-the-day but as we've read in other threads, as a collective unit, you can't stop the rich or tax them into submission with the hope that the poor will gain....they have too many options and too many work-arounds.
I don't think anyone has argued in this thread for Communism, against capitalism or against there being rich people around. Some inequality provides an incentive for innovation and advancement.

The issue now is the extreme degree of inequality, not that some people are richer than others. We have not seen ratios like this is wealth inequality since the Gatsby era, after which the whole economy collapsed in the great depression. And the trend in the inequality gap is growing.

Henry Ford wanted a strong middle class so there would be a market for his products.
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Old 06-09-2014, 11:09 AM   #77
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Great thread. There are well worded and referenced posts that can inflame the ire of anyones philosophies, political persuasions or perception of fairness. On the one hand the pleomorphism of opinion in this thread is a reflection of the multitudes of paths members of this forum have taken to success.

I think it is fair to say this forum is comprised of individuals mainly in the upper 5% or on their way to the upper 5%, maybe higher on average. As such we hardly represent the opinions of those in the vast majority of society. In that sense this entire thread wreaks of the spirit of Kings, Dictators, Fascists and self anointed philosophers, myself certainly included.
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Old 06-09-2014, 11:39 AM   #78
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I don't think anyone has argued in this thread for Communism, against capitalism or against there being rich people around. Some inequality provides an incentive for innovation and advancement.

The issue now is the extreme degree of inequality, not that some people are richer than others. We have not seen ratios like this is wealth inequality since the Gatsby era, after which the whole economy collapsed in the great depression. And the trend in the inequality gap is growing.

Henry Ford wanted a strong middle class so there would be a market for his products.
I wasn't suggesting anyone was pushing for Communism...just an observation that there seemed to be a certain level of resentment toward the super-rich...a cultural move from aspiration to envy. A few here have commented on feeling guilty for receiving the rewards of hard work and sacrifice.

I worry about a culture that tries to make you feel bad for having succeeded...the 'we all must win a trophy' mentality. When the winners start feeling guilty, well.....

While revisionists may cite wealth inequality as a cause of the Great Depression, most historians will claim that one of the main factors was the average American (blindly) diving into the stock market on margin during the 20's, coupled to poor regulation of bank covers; among a whole slew of other things.

It wasn't just the rich who were partying during the "Roaring 20's"! Right alongside Gatsby was a huge and growing middle class...until it all fell apart (see 2008)
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Old 06-09-2014, 11:43 AM   #79
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In more practical terms, do ER people need to plan for living in gated communities if inequality leads to civil unrest as it has in the past?

An acquaintance went on a real estate tour of Palo Alto, looking at various $15 million homes.

They passed the home of Mark Zuckerberg and there were armed guards posted on the outside. Now this area of Palo Alto was originally residential and middle class. So there are few homes with walled and gated compounds. So the security setup for billionaires may not be ideal here as it would in other more sparsely populated areas.
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Old 06-09-2014, 11:45 AM   #80
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I know there's a thread on the original version...which I did not see on the forum after a ER.org search. (If I'm wrong, flail me, dear moderator!)
Yet another incentive to being a moderator.
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