Money Hoarders and Fat Cats?

[Andre1969]

People are not interested in FB for communicating. They want to be able to be the "star", by spouting off their opinions and having people listen to them. They aren't on there to engage in logical dialogue to learn things. Many people in the world aren't interested in learning, but in self-validation and self-affirmation.

I run into this pretty regularly, and have learned to keep my mouth shut, and just let the jackass jump and bray all it wants. A few months ago, one of my friends posted one of those tired memes that whines about how the democrats would raise taxes and the economy would soar, the republicans would slash the upper tax rate and the economy would plunge into depression.

I dissected the thing, bit by bit, quoting a bunch of facts. For example, the thing said that Roosevelt immediately raised the top tax rate to over 90%, and the economy immediately rebounded. Umm, no. The economy tanked in 1929, had actually made some serious progress towards recovery by 1932. In 1933, Roosevelt's first year in office, tax rates went up, and I believe the Great Depression bottomed out in 1934. However, that 94% tax bracket didn't take effect until 1944, well into WWII. I also mentioned that the country was still in the crapper long after the Great Depression "officially" ended, and it wasn't until WWII that we really got rolling again. Incidentally, both of my Grandfathers went into the Marines...not because they got drafted, but because it was the only way they could find work! I forget when Dad's Dad went in, but he got out in 1939, just as the Germans were invading Poland. And when he got out, he STILL couldn't find work down in Tennessee where they lived...they had to come all the way up here to DC to find work! Mom's Dad enlisted in 1940, I think, but once WWII broke out, they made him stay in.

The blurb also went on to say how Reagan dropped the top tax rate, and we spun into the greatest recession since the Great Depression (at the time). Umm, again, no. Reagan took office in January of 1981. That particular recession had started in late 1979. 1980 was a bad year. 1981 was a worse year. The tax brackets were left alone for 1981, with the top rate being 70%. It was dropped to 50% for 1982, which was when the recession bottomed out. By 1983, things were turning around a bit, and the economy was rolling again by 1984. The top rate wouldn't get cut again until 1987, halfway through Reagan's second term, and that was to 38.5%.

Well, despite my well-written dissection, all I got was a response along the lines of "Well, you are entitled to your opinion, but it's obvious that many people do not agree with you. And I am not in the mood to debate it right now".

So apparently, this guy just liked to spout his mouth off, and did not want to bother with facts. Now, I wasn't trying to glorify the Republicans, nor slam the Democrats, but wanted to just infuse a little truth into this thing. BTW, here's where I got my "opinion" from... http://taxfoundation.org/sites/taxfoundation.org/files/docs/fed_individual_rate_history_nominal.pdf

 

[ERhoosier]

My main concern our representative democracy depends on a prosperous middle class. Do away with that and civil unrest becomes more 'normal'. Not so good.

What defines "middle class"? Is the definition based on economics or social status...or both? Most accept that in purely economic terms a middle class will always exist by definition. There will always be folks with a mean/median income &/or NW. OTOH sociologists continue to argue about definitions of middle class, inc sub-classes.
https://en.wikipedia.org/wiki/American_middle_class

The US "middle class" (however one defines it) has always been somewhat elastic in both size and character. Income inequality has not correlated with civil unrest becoming "normal". The '60's and '70's were a period of much lower overall income inequality than we have now.
http://www.census.gov/hhes/www/income/data/historical/inequality/IE-1.pdf
Yet over several years there was periodic rioting and widespread social unrest (over overt racism, the draft, Vietnam war, gov't corruption, etc.). IMHO- This was much more due to upset with gov't policies/conduct than income inequality.

I am not so pessimistic that the American "middle class" is disappearing, but rather that it is in a period of evolution. As more and more pursue the education &/or technical training needed to command US "middle class" wages in the increasingly world-based economy, the middle class will rise again. (Check back in 10 years to see if I'm off my rocker )

 

[timo2]

I've noticed a tangible uptick in demonizing the rich over the past few years.

It probably coincides with the the widening income inequality issues that have been developing for the last 30 years, made worse by the loss of traditional 20th century paths to prosperity people are familiar with. New paths to prosperity are not working so well for many people. The income of many families has been declining in real terms, and some are getting resentful. Because they did everything according to the old, accepted paths to prosperity, but those aren't what they were.

For instance, coal miners today are probably akin to where horse carriage workers exactly 100 years ago. I'm a former mining engineer, (but that was only profession #1, and I'm on #5 now), and miners make good money, a living wage. But most mining moved to richer deposits overseas years ago, and the last hangers on are the coal miners. But technology is passing them by. and unless they adapt to new situations, they too will have a declining income.

This is not an academic issue. Civil unrest could ensue if no action is taken to assist people's transition to new paths to prosperity.

 

[MooreBonds]

It probably coincides with the the widening income inequality issues that have been developing for the last 30 years, made worse by the loss of traditional 20th century paths to prosperity people are familiar with. New paths to prosperity are not working so well for many people. The income of many families has been declining in real terms, and some are getting resentful. Because they did everything according to the old, accepted paths to prosperity, but those aren't what they were.
...
This is not an academic issue. Civil unrest could ensue if no action is taken to assist people's transition to new paths to prosperity.

Just a few factors that are undoubtedly important to this topic, and which aren't often brought up in this discussion:

1. Immigration: From the graphs I see on google searches, immigration into the US had a significant increase starting at around 1970ish. Add in illegal immigration, and you have MANY more people competing for jobs that haven't been increasing in as great of a number. And then add in the HB-1 visa program, and you have even more non-Americans vying for decent jobs - like your job and your neighbor's job. We all know basic economics: when you have a big increase in the supply of something, the equilibrium price will have pressure to stagnate or drop.

2. Workforce participation by women: The % of women in the workforce has steadily grown over the years. Higher supply of labor will tend to result in a lower equilibrium wage. While this item may not be a huge impact, when coupled with #1, it all adds up...

3. SS/Medicare taxes: These have increased considerably. Just a few datapoints of the total employee's portion:

1950: 1.50%
1970: 4.80%
1990: 7.65%

Double it for the total impact with employer contribution. This is obviously a direct impact that effects ALL lower income workers, since everyone has these taxes taken out. Having just 1.50% of your income taken out vs 7.65% taken out is a big difference. And since there is a cap on SS taxes, it impacts the wealthy far less as a % of their income than it effects the paycheck of the lower/middle class.

4. SS/Medicare BENEFITS - Speaking of SS, it's also providing the average lower income worker with much more net BENEFIT in the future than it did in the past: The average life expectancy has increased considerably over the years, including for lower income workers. Look at how many lower income workers will collect SS for more years in the future vs back in 1940/1960. This is a substantial amount of "wealth" that the lower/middle class will enjoy compared to the past which, AFAIK, is NOT being counted for or shown in these 'wealth disparity' graphs. SS is a much, MUCH smaller % of wealth for the top 5%. So adding in the SS benefit to the lower/middle class will greatly increase their "wealth".

Plus, add in Medicare! Medicare was created in 1965. Before then, everyone paid their own way. Now, the poor/middle class have, essentially, very reduced cost healthcare when they reach 65 (or completely free if they have no money). If you don't think this is worth a huge amount, then offer to underwrite the healthcare expenses for the average lower class retiree over 65. AFAIK, like SS, the "wealth" of having free healthcare after 1965 is not shown in any graphs of wealth comparisons. For the 1%, Medicare's value is not much compared to their wealth. But for the lower/middle class, adding in the value of this Medicare benefit is a big increase to their total net worth.

Tax Rates - What % of Americans haven't paid tax in the past? Here's one graph:
Chart of the Week: Nearly Half of All Americans Don't Pay Income Taxes

At what point in recent history have so many paid so little (ZERO!) in Federal/State income taxes? And yet people still cry that it's "not fair", and that the rich must pay more in taxes. Where will all of this additional tax revenue go to that they want to extract from the wealthy?

 

[aim-high]

Some good posts here. Marking it for subscription.

 

[athena53]

At what point in recent history have so many paid so little (ZERO!) in Federal/State income taxes? And yet people still cry that it's "not fair", and that the rich must pay more in taxes. Where will all of this additional tax revenue go to that they want to extract from the wealthy?

It's worse- many get an Earned Income Credit, which is pretty much a negative income tax. I love the mentality that if you tax "the rich", they'll just keep doing what they're doing and pay the taxes. The richer you are, the more options you have, from shifting more of your bonds to munis, setting up a trust to protect your estate from inheritance taxes, all the way to changing citizenship if a lot of money is involved.

And taxing the big, rich corporations? Oops, they're all buying companies in Ireland and changing their tax domicile to Ireland because Irish tax rates are lower.

 

[Andre1969]

The richer you are, the more options you have, from shifting more of your bonds to munis, setting up a trust to protect your estate from inheritance taxes, all the way to changing citizenship if a lot of money is involved.

And taxing the big, rich corporations? Oops, they're all buying companies in Ireland and changing their tax domicile to Ireland because Irish tax rates are lower.

And, when the rich and the big corporations do these actions, which are legal, and were put into the tax code by the government, they get demonized. Shouldn't the real culprit be the government, which put those tax provisions there in the first place?

I also hate it when people like to throw about these sky-high top tax brackets we used to have, and say that we should go back to them and the economy would prosper. I've tried to infuse a little reason into those debates, saying that very few, if any people actually paid those top rates, because of various deductions, exemptions, etc. I also told them to think...if the government took 90% of everything you made above a certain level, would YOU keep working? I sure wouldn't, and most others wouldn't, either. Heck, right now I have trouble staying focused on working, and I'm only seeing 47 cents on the dollar! (In my case though, that includes federal/state taxes, SS, health insurance, and a maxed-out 401k) Their response? Let those people who don't want to work drop out, and others will replace them! D'oh!

 

[ERD50]

Just a few factors that are undoubtedly important to this topic, and which aren't often brought up in this discussion: ...

I won't requote all of it but I think you make some good points.

What defines "middle class"? Is the definition based on economics or social status...or both? Most accept that in purely economic terms a middle class will always exist by definition. ...

It probably coincides with the the widening income inequality issues that have been developing for the last 30 years, ...

IMO, there are so many ways to measure income inequality (and much of that recent popular book has been debunked), that I believe it is just an 'issue' whipped up to a frenzy by people who can profit from that frenzy.

... This is not an academic issue. Civil unrest could ensue if no action is taken to assist people's transition to new paths to prosperity. ...

I don't think we will see civil unrest unless it is encouraged by those profiteers. The difference between now and other times is that the 'poor' generally have A/C & heat, color TV & cable, cell phones, game boxes, dishwashers, microwaves, etc.

Yes, the poor in other countries have improved their lives by doing work for a price we can't/won't in the US. And that has had a drag on middle/lower class jobs. But 'fixing' that could do more harm than good.


-ERD50

 

[travelover]

It's worse- many get an Earned Income Credit, which is pretty much a negative income tax. ........

I've actually heard of millionaires that deliberately keep their taxable incomes low enough to qualify for government health care subsidies!

 

[Andre1969]

According to this site, IRS Finds One in 189 High Earners Paid No 2009 U.S. Tax - Bloomberg , in 2009 1 out of every 189 households with an AGI over $200,000 managed to avoid paying any federal taxes. Unfortunately the article doesn't go into depths over how they do it. However, if they had all their money in tax-free municipal bonds, that would do it, wouldn't it?

Also, if you own stock in a foreign company, you have to pay a foreign tax on the dividends, but then you get a credit against your federal tax for that same amount. So, if all my income came from, say, Toyota stock, I might get by with paying no federal income tax, although I would be paying the foreign tax.

 

[Koolau]

I think "wealth" is one of those topics which becomes very emotional for most people. Humans seem quite prone toward selfishness which includes comparing oneself to others. I suppose it is part of the normal survival instinct. If one recognizes this tendency and keeps it all in perspective, it can be a fun diversion to see folks reactions to wealth (or status or physical "beauty", or natural ability, etc..) If one takes it all too seriously, it leads to envy, spite, and even violence. I don't suppose our instincts will change anytime soon. So "helping" folks on FB be more "realistic" about wealth is probably an exercise in futility. It's sort of like telling someone to "get over it" when they have a perceived hurt or grudge, etc. Most folks believe they are entitled to their opinions and perceptions (and many to their own facts). Expecting this to change is probably not realistic.

There was a time I would have tried to "help" others at least see their own prejudices (we all have them.) Now, I pretty much just let folks think what the want to think. If someone were to ask my advice, I'd probably give it, but I find more folks who want affirmation of their own opinions than those who actually want to learn something. By the way, I have the same blind spots so I only comment on the human condition and don't think I have any "answer" to it. Therefore, YMMV.

 

[rodi]

My issue is with the term "weath managers". It's a marketing term. What does a Wealth Manager do that is different than a Financial Advisor - they're basically the same. The term Wealth Manager is to puff up the potential client - they're more important than joe schmoe who sees a financial advisor.

And as most people here know - the wealth manager is just interested in getting a percentage of the clients money under management.

I hadn't heard the term till a former coworker explained that she and her husband had a "wealth management team" so she really didn't know what they were invested in. But the main wealth manager told them they couldn't retire till 65. (she's my age and she and her husband have more assets than my family does.) I challenged her that she should learn about how/what she's invested in, because no one would care about her money as much as she would... And that her wealth manager had an incentive in keeping her assets under management. She never accepted my challenge. She liked the term "wealth manager" because it made her feel rich. (She was all about status.)

 

[Chuckanut]

As I have said my main concern is that the very wealthy are so very disconnected from the rest of society that they don't know what it means to have to struggle to have the basics in life.

For a while I watched a TV show called UnderCover Boss, where the owner/CEO/Big-Cheese in a company would pretend to be a low level employee and find out what is really happening in the company.

I don't put much stock in so called 'reality' TV shows. But, one theme that was repeated over and over again, was how little the big bosses knew about what actually went on to keep their companies running day-to-day, and, also, how little they knew about how some of their business decisions hurt their employee's lives outside of work.

 

[marko]

I've actually heard of millionaires that deliberately keep their taxable incomes low enough to qualify for government health care subsidies!

+1 LOL! I've heard the same thing so it must be true!

The hard fact of life is that while it makes good rhetoric to attack the rich, as a group, they're pretty hard to hurt.

As noted, they have too many options.

"Rich whack-a-mole"...hit them here, they'll just quietly go somewhere else.

Sounds good, feels good, but in the end they're not going to lose and, as with the HC subsidies, they actually can come out ahead of programs designed to make them pay more!

 

[samclem]

As I have said my main concern is that the very wealthy are so very disconnected from the rest of society that they don't know what it means to have to struggle to have the basics in life.

You can bet that about 50% of the people working today would say the same thing about the people who frequent this board--the "very rich" who can afford to retire early, and who have no idea what their daily lives are like.
I have an idea what their daily lives are like. I wonder if they have an idea what my life was like. Everybody makes choices, and they shape our lives.

 

[Koolau]

For a while I watched a TV show called UnderCover Boss, where the owner/CEO/Big-Cheese in a company would pretend to be a low level employee and find out what is really happening in the company.

I watched a few of these episodes and began to wonder if it weren't a "made up" scenario for "good" TV. I simply could not relate to the "big boss" and his/her "cluelessness" about his/her own business and his/her own employees and their relationship to the organization. Nor could I understand the cluelessness of some of the employees who couldn't (almost instinctively) understand that the business's "business" was to make money, and NOT just be a wonderful employer to them (because they were such wonderful, deserving, high school dropouts.)

But I also knew from experience that bosses and employees have a natural "divide" which just goes with the territory. My direct reports "loved" to show me up about minor things I could not do that they could (specific use of instrumentation, for instance.) I might have to re-read the manual to make the most of an instrument's capabilities while they did such things routinely - because that was their j*b. Then, they resented me when they had a two-day problem they couldn't figure out and I would take a look at their outputs and solve their problem in 15 seconds. It's just the nature of the beast and not necessarily "cluelessness" in all cases.

I think a lot of it just goes back to human nature which is, IMHO, much of what leads to the issues surrounding OP. YMMV as always.

 

[braumeister]

Have any of you run into this attitude, on FB or elsewhere?

Only on FB.

Do you bother to argue with them?

Never. Never try to teach a pig to sing; it wastes your time and it annoys the pig. [Heinlein]

 

[rodi]

There's a reason I'm not on facebook. LOL

 

[Chuckanut]

I watched a few of these episodes and began to wonder if it weren't a "made up" scenario for "good" TV. I simply could not relate to the "big boss" and his/her "cluelessness" about his/her own business and his/her own employees and their relationship to the organization.

I also wonder about so called reality shows and how orchestrated they are. I thought several times about bringing it up at all in this thread. I probably should have found better examples of how the 'big boys and girls' are out of touch with what the common people experience.

In retrospect the recent article about the 'poor door' that middle income people must use to gain access to their subsidized apartments in New York would have been a better example.

 

[ERhoosier]

As I have said my main concern is that the very wealthy are so very disconnected from the rest of society that they don't know what it means to have to struggle to have the basics in life.

True, but so is the reverse. Few workers truly understand the massive overhead or risks of running a business. Or the concept that their jobs ultimately depend upon their company's success....the output of good products/services at competitive prices. It might seem nice if your company suddenly doubled your wages, but not so nice later on if it destroyed the company's financial viability.... and your job along with it.
And to be fair- Not all the rich were born with a silver spoon in their mouth. There are a number of wealthy folk who DO know what it means to struggle for the basics because they did so for part of their lives. They tend to be the ones who truly give back in meaningful ways.

 

[MooreBonds]

As I have said my main concern is that the very wealthy are so very disconnected from the rest of society that they don't know what it means to have to struggle to have the basics in life.

Apart from an unrelated example of "undercover boss", what metric are you using to determine that those with wealth are 'out of touch' today compared to times past, other than appearances in news stories and headlines? Did you feel the same way in 2005? What changed between 2005 and now (other than news broadcasts)?

How do charitable contributions compare between, say, 1790 vs 1850 vs 1950 vs today?

Did people like George Washington and Thomas Jefferson, who lived on vast tracts of land and had slaves and servants, actually "understand" the plight of those that were starving to death if their small plot of crops failed? Did they give vast sums to charities to feed the masses?

Did people like Andrew Carnegie in the early 1900s truly "understand" the plight of the commoner? While it's great that Carnegie donated a large % of his wealth for the arts - do you realize how many people even in his day had to go to great extremes just to get a decent amount of calories to eat?

And when Buffet and Gates are so obsessed with AIDs and handing out free condoms in Africa, while millions of adults and children worldwide still die from incredibly basic things like lack of clean water and sanitation, is that really 'being in touch' with them, despite donating the bulk of their wealth to a charitable organization?

According to this site, IRS Finds One in 189 High Earners Paid No 2009 U.S. Tax - Bloomberg , in 2009 1 out of every 189 households with an AGI over $200,000 managed to avoid paying any federal taxes. Unfortunately the article doesn't go into depths over how they do it. However, if they had all their money in tax-free municipal bonds, that would do it, wouldn't it?

Also, if you own stock in a foreign company, you have to pay a foreign tax on the dividends, but then you get a credit against your federal tax for that same amount. So, if all my income came from, say, Toyota stock, I might get by with paying no federal income tax, although I would be paying the foreign tax.

The article you linked referenced a combination of factors that lead to that small % not having a net taxable income: municipal interest, large health care expense deductions, and charitable contributions being large, common factors. But since any taxpayer at any income level could also end up with zero tax liability with large enough health care expenses and large enough charitable contributions, is it really a big surprise? We're talking 0.26% of the high income earners in a one-year snapshot (2009) - and the article mentions it's the highest % since 1977.

And don't forget that 2009 was a very good year for adult diaper manufacturers, given the stock market crash. That would result in considerably less interest and dividends and capital gains income in 2009 than would normally be expected by the high % income earners. So with much lower interest/dividends/capital gains to declare, but the same amount of medical bills and charitable donations and municipal interest, it would be expected to see a higher % that end up with no taxes than during the boom boom years of almost every year in the past 30 years, save maybe 2001, when most years saw annual increases of wages/dividends/interest/capital gains by the high earners.

 

[haha]

True, but so is the reverse. Few workers truly understand the massive overhead or risks of running a business. Or the concept that their jobs ultimately depend upon their company's success....the output of good products/services at competitive prices. It might seem nice if your company suddenly doubled your wages, but not so nice later on if it destroyed the company's financial viability.... and your job along with it.
And to be fair- Not all the rich were born with a silver spoon in their mouth. There are a number of wealthy folk who DO know what it means to struggle for the basics because they did so for part of their lives. They tend to be the ones who truly give back in meaningful ways.

IMO creating an honest and successful business is giving enough. I went out to dinner last night with 3 guys who live normal middle class lives, good jobs plenty money to spend on eating out. Most of what they talked about was the evil rich. Morons.

 

[pb4uski]

True, but so is the reverse. Few workers truly understand the massive overhead or risks of running a business. Or the concept that their jobs ultimately depend upon their company's success....the output of good products/services at competitive prices. It might seem nice if your company suddenly doubled your wages, but not so nice later on if it destroyed the company's financial viability.... and your job along with it.
And to be fair- Not all the rich were born with a silver spoon in their mouth. There are a number of wealthy folk who DO know what it means to struggle for the basics because they did so for part of their lives. They tend to be the ones who truly give back in meaningful ways.

+1 I find that many people with "normal" mid-level jobs tend to resent high income workers without understanding the hours and stresses that go along with many high income jobs (long workdays, weekend work, on call 24/7, high pressure deadlines, etc). They resent the higher income others earn but if they were told that they needed to work till 3 am or pull an all-nighter to meet an important business deadline they would have a fit and probably refuse to stay. They also don't appreciate the lack of job security of many high income jobs - you can be gone with the snap of a finger for no particular reason at all compared to the due process associated with mid level employees.

 

[travelover]

.......They also don't appreciate the lack of job security of many high income jobs - you can be gone with the snap of a finger for no particular reason at all compared to the due process associated with mid level employees.

So true. Some have had to live the rest of their lives on only a $100 million payout, or so.

 

[robnplunder]

IMO creating an honest and successful business is giving enough. I went out to dinner last night with 3 guys who live normal middle class lives, good jobs plenty money to spend on eating out. Most of what they talked about was the evil rich. Morons.

So, why hang around with morons?