Capital in the Twenty-First Century by Thomas Pickety

[mpeirce]

Presumably though, the wealth tax would target people who have much greater wealth, perhaps like the estate tax which exempts what, the first couple of million?

I doubt it. Oh sure, at first, but it would cover more and more people over time - much like the income tax has.

And I'm sure that if this ever came to pass, we (us clever humans) would figure out many many work arounds. Of course hiding wealth would hugely distort the economy, but that's not really the point is it.

Frankly I'd much rather see us go in the opposite direction: get rid of the income tax and replace it with a consumption tax (replace, not add in beside the income tax). This would encourage people to save and build wealth. I guess I'm just too old fashioned...

 

[Independent]

Wonder how many ER types would be amenable to a wealth tax.

It kind of punishes people who save and plan responsibly to have retirement income, vs. the majority of retirees who don't have much savings at retirement.

Presumably though, the wealth tax would target people who have much greater wealth, perhaps like the estate tax which exempts what, the first couple of million?

See post #7 above.

If those numbers are correct, it would have very little impact on American wage earners who simply defer spending to a later age.

 

[Walt34]

I'm a big fan of actually reading a book before discussing it's contents, but I am also widely considered to be some sort of weirdo.

Lets all be careful to stick with economics here and avoid wobbling off into political ideology-land.

What? You expect people to consider mere facts before stating an opinion? That is strange!

 

[ERD50]

I'm a big fan of actually reading a book before discussing it's contents, but I am also widely considered to be some sort of weirdo. ....

What? You expect people to consider mere facts before stating an opinion? That is strange!

I guess I saw this thread more like getting information from book reviews. Plenty of people read a book or movie review beforehand. That's not strange, is it?

Especially with a 700 page book - more motivation to try to get some info on it before deciding to tackle it or not.

-ERD50

 

[FIGuy]

What? You expect people to consider mere facts before stating an opinion? That is strange!

I stated that there was a very good review in the issue of the economist that week. I also clearly stated that I hadn't read the book yet. I believed a good review in a magazine to be relevant to the OP.

I made it half-way through Capital and this book is frankly too slow and repetitive. I read one a couple years back called "The haves and the have nots", written by a lead economist with the World Bank I believe. That book was very interesting and looked at social / political stability as a function of inequality over the past few thousand years. Short, sweet, and very informative.

This other book is a bit of a fad IMO.

 

[clifp]

What is meant by income transfer?

Certainly any of the anti poverty programs would count as income transfer. Probably most Agriculture subsidies. I am not sure about SSI, but SDI definitely would count and I don't know about Medicare.

These can be quite substantial. For another forum I calculated that Single mother with a young child working full time at the minimum wage $7.25/ hour $1200/month would be eligible for $280/month earned income tax credit, a SNAP (food stamps) of $250-$500/month and WIC payment of another ~100/month in many case boosting her monthly income from $1200 to $2,000+ month.

The $80 billion spent on SNAP distributed to 40 million+ is pretty clearly significant boost to the income of those at the bottom.

 

[zedd]

700 pages to say what my mama told me years ago - the rich get richer

 

[mpeirce]

the rich get richer

The rich will always be getting richer over time, unless civilization subsides.

What I care about is are the poor getting richer too? In the US, if you count transfer payments, the answer is certainly yes.

 

[explanade]

But not at the same pace as the rich.

That's the rub, the widening gap, the increasing inequality.

 

[mpeirce]

> That's the rub, the widening gap

See I just don't get it.

If I double my income I'm much better off.

If the person over there quadruples their income I'm still better off, not worse off.

Isn't the "increasing inequality" issue simply envy?

 

[mrfeh]

Isn't the "increasing inequality" issue simply envy?

No, it's not. Do some research - lots of information available online.

 

[M Paquette]

But not at the same pace as the rich.

That's the rub, the widening gap, the increasing inequality.

There are some who see this as a simple reversion to the mean, an undoing of the temporary surge in middle class population from the 20th century.

The normal state of population vs standard of living was a pyramid for most of the past 6,000 years, with a small portion of the population quite well-off compared to the multitudes at the 'base of the pyramid.' Our post-WWII flattened-diamond pattern with it's relatively "level" social order was fairly unique, with a relatively high overall standard of living, and high levels of economic activity as much of the wealth of the society was actively moving through the economy, promoting growth and competition.

We may be moving back to the longer term stable state of much of the population living at a relatively low standard of living compared to the capabilities of our civilization, with much of the wealth of the society concentrated in a relatively small portion of the population, and withheld from active use in the economy in favor of rent-seeking activity. This represents an inefficient use of capital, which bothers some economists.

 

[explanade]

Reversion to the mean?

Some have said there's greater inequality now than during the Gilded Age and the robber barons.

Historically, certain levels of inequality have led to civil unrest. That may or may not happen now but there's the other question of whether having wealth more concentrated is the best thing for economic growth.

 

[mrfeh]

Reversion to the mean?

Some have said there's greater inequality now than during the Gilded Age and the robber barons.

Historically, certain levels of inequality have led to civil unrest. That may or may not happen now but there's the other question of whether having wealth more concentrated is the best thing for economic growth.

I haven't read Piketty's book, but there was an article in Time this last week about it. One of the things mentioned in the article is resulting civil unrest...such as what happened to the French aristocracy.

There also seems to be correlation between extreme inequality and volatile market events. I'm not able to make the case for causation, if it exists.

 

[ERD50]

> That's the rub, the widening gap

See I just don't get it.

If I double my income I'm much better off.

If the person over there quadruples their income I'm still better off, not worse off.

Isn't the "increasing inequality" issue simply envy?

This is what I wonder also (and I'm not saying either view is right/wrong - it's just a question).

But let's say we implemented a new plan in our schools, and ten years later did a full evaluation. If every group of students, from the lowest 10% group to the highest 10% group, had significant improvements in their test scores, but the highest 10% had relatively higher levels of improvement, would we call that a 'failure' or a 'success'? Would we be glad that everyone is doing significantly better, or feel bad that the 'gap' widened?

And I still think it is important to look at the global economy, rather than any specific country's economy. We may have a widening gap in developed countries, but if the developing countries are improving, maybe the global gap is narrowing? Personally, I think it is more important that the really poor people in this world ( literally risking starvation, devoid of a regular supply of clean water and basic medical standards) are moving up, than it is for a 'lower economic strata' person in the US to move closer to the upper tier in the US.

-ERD50

 

[explanade]

The middle class isn't doubling their income. To a certain extent, our consumption-oriented economy is about doing well or having things relative to your neighbors, the status symbols the keeping up with the Jones mindset.

I don't think however that people would resort to violent revolt in the US or other affluent countries because of inequality.

People have just enough to not want to risk losing what they have. Though if you look at some recent conflicts, you had people living for decades in peaceful coexistence, such as in Bosnia. But then when war broke out, stoked up by nationalist sentiments from a neighboring country, these people who used to live next to each other perpetrated some heinous acts.

Inequality may not be the trigger for violence or unrest but once such a situation occurs, it may be the fuel that makes the situation spiral out of control.

In an atmosphere of instability, you can imagine the biggest most visible targets would be these big compounds or gated communities that the wealthy live in.

 

[M Paquette]

In an atmosphere of instability, you can imagine the biggest most visible targets would be these big compounds or gated communities that the wealthy live in.

Town & Country Magazine has run some nice articles with tips on improving one's home security.

New Home Security Protocol - Christopher Falkenberg on Home Security - Town & Country Magazine

1) Confuse the internet
2) Take stock of your staff
3) Replace your alarm system with one connected to the insite control center.
4) Build physical barriers.
5) Install army-grade infrared.
6) Create a panic room.
7) Secure your collections.

Ten Security Tips From an Ex-Secret Service Agent - Town & Country

1) When traveling to jurisdictions with a high corruption index, deplane in the hangar.
2) Confuse the enemy.
3) Stay in small boutique hotels and ask for a room facing the courtyard.
4) You want to telegraph that this will be a very successful kidnapping to reduce risk of death.
5) Quibble over the ransom, so they don’t demand too much.
6) Operational counter surveillance: How are you today? What are you doing here?
7) Worry about medical emergencies.
8) Any safe can be broken into.
9) Have a backup security camera.
10) Just because you have a security program, doesn’t mean your kids are going to be treated like Sasha Obama.

Good advice for us to follow.

 

[Independent]

Certainly any of the anti poverty programs would count as income transfer. Probably most Agriculture subsidies. I am not sure about SSI, but SDI definitely would count and I don't know about Medicare.

These can be quite substantial. For another forum I calculated that Single mother with a young child working full time at the minimum wage $7.25/ hour $1200/month would be eligible for $280/month earned income tax credit, a SNAP (food stamps) of $250-$500/month and WIC payment of another ~100/month in many case boosting her monthly income from $1200 to $2,000+ month.

The $80 billion spent on SNAP distributed to 40 million+ is pretty clearly significant boost to the income of those at the bottom.

Yes, I know I'm being picky, but

- according to this source Eligibility | Food and Nutrition Service :
The maximum SNAP benefit for a two person family is $347/month.
In the simple case you've given, the benefit would be $347 - .3 x ($1,200 - $240 - $152) = $105

- OTOH, I think she would also be eligible for a $1,000 annual child tax credit.

 

[photoguy]

> That's the rub, the widening gap

See I just don't get it.

If I double my income I'm much better off.

If the person over there quadruples their income I'm still better off, not worse off.

Isn't the "increasing inequality" issue simply envy?

If you need to compete for scarce goods, the income gap makes a big difference. This is basically what is happening in the sf bay area with housing: people with lower paying jobs are squeezed out of the market even if their income is much higher than it would be in other parts of the country. I imagine admission to elite universities might also fall into this category.

But let's say we implemented a new plan in our schools, and ten years later did a full evaluation. If every group of students, from the lowest 10% group to the highest 10% group, had significant improvements in their test scores, but the highest 10% had relatively higher levels of improvement, would we call that a 'failure' or a 'success'? Would we be glad that everyone is doing significantly better, or feel bad that the 'gap' widened?

If your goal is to explicitly narrow the gap then it has to be considered a failure (even though on other criteria it's a success). This might be relevant in states where the top X% of students are guaranteed admission to flagship state universities and you want a more "diverse" freshman class.

I think in areas where there is a "winner take all" type of outcome, absolute improvements in income/test scores/etc. don't really help as it is the relative standing that is important.

 

[samclem]

Town & Country Magazine has run some nice articles with tips on improving one's home security.
. . .
4) Build physical barriers.

A cheap idea I saw recently and hadn't heard before: Put one of those "open a bit" locks (like the ones on the inside of hotel room doors) on the inside of your bedroom door. In the unlikely event that there's an intruder in the house while you are asleep and they try to get into the bedroom, this will prevent the individual from entering unnoticed and provide enough time to bring Mr Ruger to the party.
I won't be implementing the idea because our MBR has two doors, and I'm sure unlatching both of these each morning would become a PITA. But for one door--no real extra hassle at at all.

 

[walkinwood]

Yes, I know I'm being picky, but

- according to this source Eligibility | Food and Nutrition Service :
The maximum SNAP benefit for a two person family is $347/month.
In the simple case you've given, the benefit would be $347 - .3 x ($1,200 - $240 - $152) = $105

- OTOH, I think she would also be eligible for a $1,000 annual child tax credit.

These calculations are so complex that even when people spend a lot of time researching them, they are still open to gotchas. I

Even at 1200/mo - there are payroll taxes and in many states (like CO) a ~4-5% state tax. But don't take my word for it - for all I know there are 10 other things that negate what I'm saying.

 

[clifp]

These calculations are so complex that even when people spend a lot of time researching them, they are still open to gotchas. I

Even at 1200/mo - there are payroll taxes and in many states (like CO) a ~4-5% state tax. But don't take my word for it - for all I know there are 10 other things that negate what I'm saying.

You are right I used a benefit calculator I found online for a state in the Plains South Dakota or Nebraska I think. I added $100, cause I figured the benefit would be greater in a state with higher cost of living. Lots of things factor into the benefit calculation, rent, utilities cost etc. On the other hand I do think vaguely remember seeing a .3 multiplier so I suspect Independent's number is closer to reality than mine.

As far as taxes go at the minimum wage level with 1 or more dependents the only taxes you are likely to pay is FICA. The EITC is designed to more than cancel out the FICA taxes you pay.

Measuring income is so bloody complicated that I may buy the book just to see how the guy figured it out.

I also really think the inequality debate would be well served by measuring consumption. Looking at the waistline of most lower income people, I don't think they are hurting for calories any more than myself.

 

[explanade]

Lower quality foods are fattening, typically processed foods with corn fructose syrup and other fattening ingredients.

Lot cheaper to get a burger at a fast food joint than healthier options.

Also people with higher incomes are able to carve out time for regular exercise (which could also be unaffordable to some) as well as have access to good nutritional and medical info about healthy habits and lifestyles.

 

[scrinch]

At least as far as I've gotten in the book, it is about disparities in the distribution of capital ownership, not in income. While they may be related in some ways, capital inequalites become inherited and thus strictly unearned (an accident of birth) while inequalities in income may be personally earned and are only indirectly passed between generations. It is this inherited/unearned characteristic of capital inequality that seems to rankle Pickety so much, I think.

Sent from my ADR6350 using Tapatalk 2

 

[Independent]

You are right I used a benefit calculator I found online for a state in the Plains South Dakota or Nebraska I think. I added $100, cause I figured the benefit would be greater in a state with higher cost of living. Lots of things factor into the benefit calculation, rent, utilities cost etc. On the other hand I do think vaguely remember seeing a .3 multiplier so I suspect Independent's number is closer to reality than mine.

Thanks. Based on your post, I found this calculator for North Dakota: Food Stamp Benefit Calculator

It's nice because it shows the calculation details that match the USDA page that I found.

When I did my example, I assumed no "Excess Shelter" deduction. If the mother in your example spends more than $404/month on rent + utilities, she has excess expenses and gets an additional 30 cents of SNAP benefit for every dollar of excess.

The big deal is that ND has a standard utility cost of $590/month if she pays for her own heat, or $217/month if she just pays for electricity and phone. Of course, someone who is raising a child on $1,200/month gross is probably really squeezing housing expense.

(I'm curious because I've got a BIL who's in bad shape financially. I've wondered if he shouldn't be applying for SNAP benefits. He just assumes he won't qualify because he has a job.)