Before the tea party, thank your lucky stars

[Khan]

Quote:

Originally Posted by kumquat Well, luck certainly plays into it. After all, I started this thread: http://www.early-retirement.org/foru...cky-20785.html In retrospect, I think that while luck had a part, upbringing did a bit (or was that luck too). I look at myself and my 4 siblings. We all were raised by LYBM parents (I was 20 before I realized our family had much more than our neighbours, you'd think we had less by the way we lived). We all had a few brains inherited from parents who (both) started university at age 16. What happened to us? Oldest, got U degree, entered civil service, rose to the most senior level possible. Retired at 59 with DB pension, serious savings and a bit of financial knowledge. Next (me), got U degree, lucked out in a private sector job, stock options etc. Retired at 58. Next two, took over family farm, worked hard, expanded it and are probably FI with a NW of 1-2M. Still farming as that's what they want to do. Youngest became a (Canadian equivalent) of a CPA. Stumbled into a startup company, became CFO, stock options etc and is maybe the most secure financially. Can probably RE at 50, when s/he gets there. All of us have a NW of 7 digits (if you include the PV of eldest's DB pension) and the first digit is > 1. We inherited good genes. We got an education if wanted. All of us worked very hard at what we did. Were we lucky or did we earn it?

All of the above?

[NW-Bound]

I don't think any of us here would argue that we should abolish all taxes. Even the hardest and brightest workers among us would concede that the US is a much better environment for the individual to excel compared to Rwanda.

But just because some taxes do some good, it does not mean that increasing the taxes would bring even better results. I understand that the Scandinavian countries have higher taxes than ours. Are their economies better than ours? If the European economic policies are that good, why don't they have anything to compete with the likes of Microsoft, Intel, AMD or Google?

I came from a much different background than most of you, and am grateful that I may not get to where I am now if I were in a different country. One of these days, I may tell my story. There are plenty of opportunities in this country; the playing field is more leveled than any other country that I know of. Frankly, I do not see how higher taxes would make it better. If anything, I fear what ziggy posted earlier. We may just discourage people from working hard and promote mediocrity.


PS. The title of the thread is meant to provoke. Whether a tax protester's financial success (or perhaps even lack of it - let's not jump to conclusion here) comes from luck or not has nothing to do with his belief that the taxpayer's money is not usefully spent. Let's debate the two separately and not mingle the two issues.

[Gone4Good]

Quote:

Originally Posted by ChrisC No one is really saying that success is solely attributed to '"luck."

But it's much harder to criticize if I can't argue against an absurdly extreme extrapolation of your point.

[Gone4Good]

I find the story about professional hockey players fascinating . . .

Quote:

In his current best seller, “Outliers,” Malcolm Gladwell reports that a disproportionate number of pro hockey players owe their success to the accident of having been born in January, which made them the oldest, most experienced players in every youth league growing up. For that reason alone, they were more likely to make all-star teams, receive special coaching and eventually become professionals.

Nobody would ever dare say that you can make it as a professional athlete without working extraordinarily hard for it. But it's not out of the question that external factors contribute considerably in the extensive winnowing process that separate the handful of pro's from the legion of also rans.

And with respect to "hard work", millions of people work hard. Many of them working multiple jobs doing back breaking labor. But we can all see that working hard isn't sufficient to be financially successful, although you wouldn't know it from reading these boards.

[NW-Bound]

As an "enlightened" society, we need to ensure that working people earn enough to make a decent living. There should be laws to protect the workers and to prevent their exploitation. Surely, there must be other means to achieve that goal than to simply tax more out of the high wage earners.

And talk about luck, capital gains by stock ownership are arguably more attributable to luck than wage incomes are. Shouldn't the former be taxed at 75%?

And talk about earning one's wage, should people who have new ideas or make useful inventions earn more than the day laborers? If yes, then how much more?

Ayn Rand has the following to say on this subject, for what it's worth.

I should note here that the Khmer Rouge held the totally opposite idea. They praised pure menial labor and hated and killed any person whom they thought was educated. After the fall of Cambodia and the entire population was driven to the countryside to be "reeducated" by physical hard labor, near-sighted people had to throw away their glasses. Mere ownership of reading glasses would classify one as an elite citizen and that might bring horrible death.

I am not saying anyone here thinks like the Khmer Rouge of course, but just to bring up a contrast with Ayn Rand's idea.

What determines the material value of your work? Nothing but the productive effort of your mind—if you lived on a desert island. The less efficient the thinking of your brain, the less your physical labor would bring you—and you could spend your life on a single routine, collecting a precarious harvest or hunting with bow and arrows, unable to think any further. But when you live in a rational society, where men are free to trade, you receive an incalculable bonus: the material value of your work is determined not only by your effort, but by the effort of the best productive minds who exist in the world around you . . . .

Physical labor as such can extend no further than the range of the moment. The man who does no more than physical labor, consumes the material value-equivalent of his own contribution to the process of production, and leaves no further value, neither for himself nor others. But the man who produces an idea in any field of rational endeavor—the man who discovers new knowledge—is the permanent benefactor of humanity. Material products can’t be shared, they belong to some ultimate consumer; it is only the value of an idea that can be shared with unlimited numbers of men, making all sharers richer at no one’s sacrifice or loss, raising the productive capacity of whatever labor they perform . . .

In proportion to the mental energy he spent, the man who creates a new invention receives but a small percentage of his value in terms of material payment, no matter what fortune he makes, no matter what millions he earns. But the man who works as a janitor in the factory producing that invention, receives an enormous payment in proportion to the mental effort that his job requires of him. And the same is true of all men between, on all levels of ambition and ability. The man at the top of the intellectual pyramid contributes the most to all those below him, but gets nothing except his material payment, receiving no intellectual bonus from others to add to the value of his time. The man at the bottom who, left to himself, would starve in his hopeless ineptitude, contributes nothing to those above him, but receives the bonus of all of their brains. Such is the nature of the “competition” between the strong and the weak of the intellect. Such is the pattern of “exploitation” for which you have damned the strong.

[armor99]

Quote:

Originally Posted by NW-Bound In proportion to the mental energy he spent, the man who creates a new invention receives but a small percentage of his value in terms of material payment, no matter what fortune he makes, no matter what millions he earns. But the man who works as a janitor in the factory producing that invention, receives an enormous payment in proportion to the mental effort that his job requires of him. And the same is true of all men between, on all levels of ambition and ability. The man at the top of the intellectual pyramid contributes the most to all those below him, but gets nothing except his material payment, receiving no intellectual bonus from others to add to the value of his time. The man at the bottom who, left to himself, would starve in his hopeless ineptitude, contributes nothing to those above him, but receives the bonus of all of their brains. Such is the nature of the “competition” between the strong and the weak of the intellect. Such is the pattern of “exploitation” for which you have damned the strong.

That was great! Thanks for the posting. An interesting point. Who should really be grateful to whom for what has been contributed in a society. Then again I supose that is determined by your personal model of the ideal soceity. For me... I just want the govt to get out of my way. Let me work, create, fail or succeed, and persue my own happiness wherever it might lead me. My mistakes are my own, and my problems are my own. Not for the govt to figure out how to fix MY life, but allow me the most freedom to figure that out for myself.

The opposite point of view (which I think I am finally starting to comprehend now) is that by and large most people will never be intelligent enough to solve their own problems. Most people are mentally inferior, and only through allowing other "smarter" people to tell them what to do (the govt, celebrities, religious groups, etc) can they ever hope to survive in life. For people who think this way, giving away all of their rights to think and do for themselves, is a small price to pay for the "security" that this brings. Existing, but not really "living" is the goal here. Having a house, car, food, without having to really worry about how it will all be paid for, is acceptable in trade for all self determinism. As in "I will be your b#ch, as long as you promise to take care of me".

As in all things in this life the choices are yours.... choose wisely...

[Independent]

Quote:

Originally Posted by NW-Bound As an "enlightened" society, we need to ensure that working people earn enough to make a decent living. There should be laws to protect the workers and to prevent their exploitation. Surely, there must be other means to achieve that goal than to simply tax more out of the high wage earners. And talk about luck, capital gains by stock ownership are arguably more attributable to luck than wage incomes are. Shouldn't the former be taxed at 75%? And talk about earning one's wage, should people who have new ideas or make useful inventions earn more than the day laborers? If yes, then how much more?

It would be nice if there were some way to "ensure that working people earn enough to make a decent living". If you define "decent" in terms of US lifestyles, I don't know how to do this. Do you have any ideas?

Capital gains tax rates currently appear lower than tax rates on earned income. I'd like to see them be equal. Does this seem excessive to you?

The Constitution gives Congress the power to grant temporary monopolies to people with new ideas or inventions. They are then able to earn whatever the market will bear. This seems like a good approach to me. I think the 1988 copyright extension act (which provides a monopoly of the lifetime of the author plus 70 years) went too far.

The first two paragraphs of the Rand quote are generally accepted in the US -- hence the Constitutional provision for patents. The third paragraph seem way over the top. That might be a literary device on Rand's part just to fit the character, or she might have actually believed it. I don't.

[ziggy29]

Quote:

Originally Posted by Independent Capital gains tax rates currently appear lower than tax rates on earned income. I'd like to see them be equal. Does this seem excessive to you?

Yes, it seems punitive to me if there is no inflation-indexing provision for long term gains. If there were a realistic way to index capital gains to inflation and there was no double taxation of dividends, I'd believe all this income should be taxed at the same rate.

But as it is, long-term cap gains are mauled badly by inflation and a dollar paid out in dividends is taxed twice, so I believe these forms of income should receive different treatment.

[armor99]

Quote:

Originally Posted by Independent It would be nice if there were some way to "ensure that working people earn enough to make a decent living". If you define "decent" in terms of US lifestyles, I don't know how to do this. Do you have any ideas?

Yup... it's called socialism....

[ERD50]

Quote:

Originally Posted by Independent It would be nice if there were some way to "ensure that working people earn enough to make a decent living". If you define "decent" in terms of US lifestyles, I don't know how to do this. Do you have any ideas?

Yes, I do. It is simple.

Let businesses (and people) succeed/fail on their own merits. The government may need to break monopolies (on either the labor or hiring side). Growing businesses will need to hire people. Those businesses will need to compete for workers by offering an attractive compensation package. Workers need to have/gain skills that are marketable to successful companies.

Problem solved.

Ok, now I hear the reply.... But, but, but, some people don't have the skills companies need... companies won't pay 'enough' (they have to, or they won't get workers - that is 'enough').

Any attempt to 'fix' that is just robbing Peter to pay Paul. If the company does not want to offer more than $X/hour, or has limited need for unskilled workers, and the government 'forces' them to, we pay for it one way or another. It's just a redistribution of resources - and that always has unintended consequences. No way to do it fairly.

The 'free market' may not always seem 'fair', but I still think it is the 'most fair' of all. And the rules are not random - so learn how to play the game.

And yes, I do think society (we), should help those who cannot help themselves. Had to say that before I get one of those 'you'd laugh at people starving in the street' comments.

-ERD50

[Independent]

Quote:

Originally Posted by ERD50 Yes, I do. It is simple. Let businesses (and people) succeed/fail on their own merits. The government may need to break monopolies (on either the labor or hiring side). Growing businesses will need to hire people. Those businesses will need to compete for workers by offering an attractive compensation package. Workers need to have/gain skills that are marketable to successful companies. Problem solved. Ok, now I hear the reply.... But, but, but, some people don't have the skills companies need... companies won't pay 'enough' (they have to, or they won't get workers - that is 'enough'). Any attempt to 'fix' that is just robbing Peter to pay Paul. If the company does not want to offer more than $X/hour, or has limited need for unskilled workers, and the government 'forces' them to, we pay for it one way or another. It's just a redistribution of resources - and that always has unintended consequences. No way to do it fairly. The 'free market' may not always seem 'fair', but I still think it is the 'most fair' of all. And the rules are not random - so learn how to play the game. And yes, I do think society (we), should help those who cannot help themselves. Had to say that before I get one of those 'you'd laugh at people staving in the street' comments. -ERD50

I was replying to this comment from NW-Bound

Quote:

As an "enlightened" society, we need to ensure that working people earn enough to make a decent living. There should be laws to protect the workers and to prevent their exploitation. Surely, there must be other means to achieve that goal than to simply tax more out of the high wage earners.

I guessed that NW-Bound would define "decent" as somewhere around half the US median wage. (I'll let NW-bound tell us if I missed the mark.) If so, I don't think your approach meets that standard. That is, I think there are people in the US who are willing to work full time but won't earn that much. Basically, international competition, low living standards in other countries, and our willingness to import unskilled workers, will pull some US-born workers down below the "US-decent" income level.

[Independent]

Quote:

Originally Posted by ziggy29 Yes, it seems punitive to me if there is no inflation-indexing provision for long term gains. If there were a realistic way to index capital gains to inflation and there was no double taxation of dividends, I'd believe all this income should be taxed at the same rate. But as it is, long-term cap gains are mauled badly by inflation and a dollar paid out in dividends is taxed twice, so I believe these forms of income should receive different treatment.

I'd agree with the double-taxation view. When I said "equal rates", I meant that we'd do something about the corporate income tax. We could simply make dividends deductible (like interest), or we could do pass-through taxes (like partnerships and S-corps).

Regarding inflation adjustments, I don't think they would be too difficult to implement, though I think I'd require that you hold the asset for some period of time before the cap gain is eligible for inflation indexing.

[ERD50]

Quote:

Originally Posted by Independent I was replying to this comment from NW-Bound I guessed that NW-Bound would define "decent" as somewhere around half the US median wage. (I'll let NW-bound tell us if I missed the mark.) If so, I don't think your approach meets that standard. That is, I think there are people in the US who are willing to work full time but won't earn that much. Basically, international competition, low living standards in other countries, and our willingness to import unskilled workers, will pull some US-born workers down below the "US-decent" income level.

I'd be interesting in hearing NW-Bound's reply.

What you say may well be true, that those businesses would not create enough demand to provide a wage base that many see as 'enough'. I don't see it as my place to define that 'standard', the economy needs to do it. But to me, the relevant question is - if that is the goal, what is the 'solution'? And is that 'solution' better than what the free market would offer?

One constant that I have seen - when you create/force an artificial (non-market) value on something, it creates unintended consequences. Often, those consequences are counter to the original intent, they do more harm than good.

Force an employer to pay $25/hour for work he can purchase for $10/hour, and that employer will be motivated to eliminate that job. Outsource it or automate it, or the extra burden makes him less competitive with foreign goods, so growth in the business slows, therefore fewer jobs. And now that the business is smaller, there are less profits to tax to pay for social programs for the people who are out of work. Very likely more harm done than good.

Be careful what you wish for. I don't think we can just 'wish' for decent paying jobs, businesses need to create them and people need to put forth the effort to make their time worth that compensation.

-ERD50

[Gone4Good]

Quote:

Originally Posted by NW-Bound The man at the top of the intellectual pyramid contributes the most to all those below him, but gets nothing except his material payment, receiving no intellectual bonus from others to add to the value of his time. The man at the bottom who, left to himself, would starve in his hopeless ineptitude, contributes nothing to those above him, but receives the bonus of all of their brains.

Wow this is tortured.

So how much time would the intellectual have to devote to thinking up his wondrous ideas if he had to go out and grow his own food, weave his own clothes, and do all the other things that the "hopeless and inept" laborer now does for him? Without the laborer, no discovery is made because the would-be scientist is relegated to milking cows. Seen in this way, the laborer is an enabler of the intellectual, without which the intellectual can't exist.

[armor99]

Quote:

Originally Posted by . . . Yrs to Go Wow this is tortured. So how much time would the intellectual have to devote to thinking up his wondrous ideas if he had to go out and grow his own food, weave his own clothes, and do all the other things that the "hopeless and inept" laborer now does for him? Without the laborer, no discovery is made because the would-be scientist is relegated to milking cows. Seen in this way, the laborer is an enabler of the intellectual, without which the intellectual can't exist.

With all due respect.... you have missed the point. A low level laborer only has the ability to milk a cow as you put it. And no matter how hard they work, or think, they will only be able to milk x number of cows in a day.

However to someone that is more intelligent, they might be able to invent a device to milk a cow twice, or three times as fast as a person could do it by hand. Maybe that man decides to start selling these devices to other "cow milkers". In turn the low level laborers can now milk many more cows then they ever could have themselves in a single day. That means they have more milk to sell at market... and they can buy more... and provide more for their families.

So you might say that the man who invented the milking device due to his superior intelligence in turn was able to help dozens if not hundreds of other people. If a person invents something to make life easier and that idea is never shared with others then you are right. But more often than not, that idea gets built into something that winds up helping many more people than just the inventor of it. This was the point that Ayn Rand was making.

[Gone4Good]

Quote:

Originally Posted by armor99 With all due respect.... you have missed the point.

No, I understand the point about productivity. And I understand the relationship between productivity and wealth creation. But the language of Rand's quote, put within the context of this tread, is completely wrong.

If you're arguing that the only way to increase the aggregate amount of wealth in the world, assuming an otherwise fixed population and resource base, is to increase its productivity through new discovery, I don't have a problem with that. But if you're arguing that each person is an island, as Rand seems to, and that each person's contribution is completely separate and independent from the contribution of everyone else in society, I do have a problem with that.

You can't leverage the laborer's efforts to free up the intellectual to do great things and then claim that the laborer's only contribution is the physical material he produced directly. What he also produced was the opportunity for the intellectual to do great things.

[dex]

Quote:

Originally Posted by . . . Yrs to Go Wow this is tortured. So how much time would the intellectual have to devote to thinking up his wondrous ideas if he had to go out and grow his own food, weave his own clothes, and do all the other things that the "hopeless and inept" laborer now does for him? Without the laborer, no discovery is made because the would-be scientist is relegated to milking cows. Seen in this way, the laborer is an enabler of the intellectual, without which the intellectual can't exist.

Talk about tortured. You are assuming that a person can not think and invent things after doing all the things you mentioned.

As a mater of fact it was done. The advances in the beginning of agriculture when it went from subsistence farming to surpluses. So people were able to at first provide for themselves, invent and develop improvements.

[NW-Bound]

Quote:

Originally Posted by Independent It would be nice if there were some way to "ensure that working people earn enough to make a decent living". If you define "decent" in terms of US lifestyles, I don't know how to do this. Do you have any ideas?

Quote:

Originally Posted by Independent I guessed that NW-Bound would define "decent" as somewhere around half the US median wage. (I'll let NW-bound tell us if I missed the mark.) If so, I don't think your approach meets that standard. That is, I think there are people in the US who are willing to work full time but won't earn that much. Basically, international competition, low living standards in other countries, and our willingness to import unskilled workers, will pull some US-born workers down below the "US-decent" income level.

Quote:

Originally Posted by armor99 Yup... it's called socialism....

Quote:

Originally Posted by ERD50 I'd be interesting in hearing NW-Bound's reply. What you say may well be true, that those businesses would not create enough demand to provide a wage base that many see as 'enough'. I don't see it as my place to define that 'standard', the economy needs to do it. But to me, the relevant question is - if that is the goal, what is the 'solution'? And is that 'solution' better than what the free market would offer? One constant that I have seen - when you create/force an artificial (non-market) value on something, it creates unintended consequences. Often, those consequences are counter to the original intent, they do more harm than good.

I don't know how to define that level either. To me, it simply does not seem right for the weaker members of society to be neglected while the rest prospers.

I used to have political discussions with my friends who are self-proclaimed libertarians. I often agreed with them enough that they said that I too was a libertarian but did not want to admit it. I then said half-jokingly that, sure I was a libertarian, but a "kinder, gentler" one (to borrow from Bush Sr.). By the way, do you know that Ayn Rand hated libertarians?

Morality or charity asides, for my own "self-interests" I know that too great an economic inequality would lead to political instabilities. That does not work out to anybody's advantage. We have brought up the French and Russian Revolutions in previous threads on this subject.

On the other hand, what we all have seen is that if the assistance is made too readily available, people tend to give up trying and become dependent on the help that the state provides. People who have raised children know this all too well.

Recently, I read an article on a charity organization that provided money to dig a well in a third-world village in abject poverty, where people have to walk for a couple of miles to a water source far from home. After the well was dug, they made a follow-up survey and found that some villagers still weren't happy. They said that it was not fair that some residents were fortunate to be living right near the new well, and others had to walk a few hundred feet to get water. They asked that new money be sent to provide plumbing into each house!

The above story took me aback, but then such is the human nature about greed and envy. I am not saying that unfortunate people should not be helped, just that any charity would be limited yet people's desire is bottomless. At some point, somebody will always be left unsatisfied.

Quote:

Originally Posted by Independent Capital gains tax rates currently appear lower than tax rates on earned income. I'd like to see them be equal. Does this seem excessive to you?

Quote:

Originally Posted by ziggy29 Yes, it seems punitive to me if there is no inflation-indexing provision for long term gains. If there were a realistic way to index capital gains to inflation and there was no double taxation of dividends, I'd believe all this income should be taxed at the same rate. But as it is, long-term cap gains are mauled badly by inflation and a dollar paid out in dividends is taxed twice, so I believe these forms of income should receive different treatment.

I raised the question about taxes on capital gains as a rhetorical question. I would think most forum members, myself included, who have or aspire to retire early, expect to live off our investment either through capital gains or stock dividends. That does not keep me from asking why these income sources deserve a special tax break compared to wages. And if luck is brought up as a contributing factor to high wages, surely it would be more so for stocks "bought low and sold high".

Anyway, I would think treating all incomes - cap gains, dividends, interests, and wages - the same would be an equitable policy. But then how does one compensate for inflationary effects on capital gains, and double taxation on dividends, etc...? It is truly a complex problem.

I know to ask questions. I do not claim to know the answers at all.

Quote:

Originally Posted by Independent The first two paragraphs of the Rand quote are generally accepted in the US -- hence the Constitutional provision for patents. The third paragraph seem way over the top. That might be a literary device on Rand's part just to fit the character, or she might have actually believed it. I don't.

Quote:

Originally Posted by . . . Yrs to Go You can't leverage the laborer's efforts to free up the intellectual to do great things and then claim that the laborer's only contribution is the physical material he produced directly. What he also produced was the opportunity for the intellectual to do great things.

I myself do not look down on laborers. I myself like to do dirty work for a physical exercise. I do not want to do that for a living, simply because it does not pay as much. People are all different, and what would this world be if we were all doctors and scientists? We are all dependent on each other, and have our own place. The compensation system works out more or less according to a free-market system, which rewards according to supply and demand. There are more laborers than researchers who can devise a swine-flu vaccine. Ayn Rand's point is that such researchers are worth more than their weight in gold. Very true, and much much more so than an engineer like me who designs some electronic devices. From a pragmatic point of view, such medical researchers are pretty rare and need to be pampered.


Anyway, back to the opening post about thanking one's lucky stars...

If I feel a need to thank my lucky stars, I would express my gratitude for living in this country, where even the poor people are greatly better off than those in third-world countries, this country where colleges are open to all aspiring citizens and not just children of an elite class, and where there is no caste system. And this is a country where the main medical problem facing the poor people is obesity and not starvation.

You have seen me mentioning Communism often. If you have not read Aleksandr Solzhenitsyn, I highly recommend "One day in the life of Ivan Denisovitch" and "The First Circle". I am thankful for being in a society that is closer to a meritocracy than most other developed countries, and for not growing up in Communism where equalitarian ideas were taken to absurd levels.

I would like to tell a story I heard from a Vietnamese refugee who escaped after the Communist take-over in 1975. When Communist cadres took over a hospital in Saigon, they interviewed all the workers there to know their job functions. Upon hearing that a janitor stating that she had been working there a couple of decades, they exclaimed "And the capitalists have not promoted you to be a doctor yet!".


And finally, I like to thank everybody for an enlightening discussion. I have learned a lot from everybody and enjoy the conversation. Last but not least, I also like to thank the moderators for not closing this thread, though we have not discussed ER much.

[armor99]

Well thank you NW-Bound (and to the moderators for not shutting down the thread early). I think this was a great discussion. I think we all learned something new, or at least a new perspective (at least I did), and no one felt the need to resort to name calling or anything, and everyone was respectful, what else can you ask for? Thanks again to everyone that contributed. The ones that argue against you are the ones you tend to learn the most from. Even if you disagree... they make you sharpen your understanding of why you believe what it is that you believe. And understanding why you have the philosophy you do in life, is always worthwhile... CHEERS!!!

[Independent]

Quote:

Originally Posted by ERD50 I'd be interesting in hearing NW-Bound's reply. What you say may well be true, that those businesses would not create enough demand to provide a wage base that many see as 'enough'. I don't see it as my place to define that 'standard', the economy needs to do it. But to me, the relevant question is - if that is the goal, what is the 'solution'? And is that 'solution' better than what the free market would offer?

I was asking NW-Bound if he had a solution. Based on his first "there must be a way" post, I thought he might have a suggestion. I think his last post says that he doesn't see any easy solutions, either.

Since market economies set wages by supply and demand, IMO we could look at the supply side. The US imports hundreds of thousands of new workers every year. In the last couple decades, most of those workers have been unskilled laborers. (It hasn't always been this way. In the first couple decades after WWII, immigrants were generally better educated than US-born workers.) Why wouldn't we change our immigration policy so that the skills of new immigrants more-or-less line up with the skills required in the growth areas of the economy? Or, at least target immigrants skills as having the same distribution as current workers?

Either of these approaches would increase the supply of skilled workers, decrease the supply of unskilled workers, increase the average productivity of US workers, and decrease the income gap. I can list some unfavorable results of such a policy, but I think the pros outweigh the cons. Unfortunately, I think the favorable impact would be pretty modest.