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Old 05-29-2023, 11:11 PM   #21
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Originally Posted by 6miths View Post
+1

It would be interesting to hear people's theories on why the wealth gap has recurred so dramatically in the US over the last 40 years. Personally, I would have thought that the gap was more due to deregulation starting in the 70s, globalization and more recently the incredibly low interest rates which mainly benefited those who were in a position to leverage and invest. Definitely far from an expert though.

PS Thanks for adding your thoughts Montecfo.
Think of an employee as a company would, by total cost. FICA, gross pay, insurance, liability cost, training, benefits, ADA compliance, etc. A lot of rules from government drive up those costs, but the employee doesn't see more money because the costs are going to third parties, overhead and compliance, or the government.

If a company can afford $100k total cost for a productive employee, then they don't care whether the employee gets $100k in a true free market, or $40k salary, with $10k compliance, a $20k health care plan, and $30k for the government under the current system.

Edit: I would disagree with your thoughts on deregulation causing it, though I would understand why you would think that. Gobalization certainly has, but that is more related to us being less competitive (self imposed). I do agree on the interest rates.
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Old 05-30-2023, 12:50 AM   #22
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Thank you for elaborating.

First, I am a pretty radical small government libertarian, so your wealth distribition tag on me is way off the mark, though after 24 years working for the federal government I know a lot of the problems first hand.

The last 50 years were a heavy experiment in central monetary planning and fiat currency, so it is difficult, but most world reserve currencies were deflationary to build their initial trust because they were effectively receipts for gold.

The Chicago School and Austrian school of economics are in line with my stated theory on inflation and wealth gaps. Unfortunately, most mainstream economists are Keynesian or even worse Modern Monetarists, which is in fashion because it supports big government.

Here is an idea into the theory:
https://cdn.mises.org/qjae11_1_1.pdf

https://mises.org/wire/how-monetary-...lth-inequality

Friedman (Chicago School)
https://www.nobelprize.org/uploads/2...-lecture-1.pdf
Thanks. Jurgs01. I did not label your views. I simply pointed out that you were using taking points used by those who favor massive wealth redistribution. It seems that may not have been your intention.

I do not see the Austrian or Chicago schools or Milton Friedman advocating deflation as a viable monetary policy. Being critical of inflation is not the same as advocating deflation. We all desire price stability and low inflation.

And again I ask, please identify and quote any mainstream economist who shares your view that deflation is a desirable condition that should be encouraged.

I also note that you have not identified any thriving deflationary economies from the past 50 years as examples of your views working.
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Old 05-30-2023, 05:44 AM   #23
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Has anyone considered that the increase in standard of living is inflationary?

We went from:
- A cave
- A simple structure with a stream nearby
- Structure + village + common waste area
- Add an outhouse and well
- Electric, indoor plumbing
- Refrigeration
- Personal transportation, garage, central heat/air
- Smart home, internet

This increase in requirements to live a modern life is inflationary.

It would seem deflation would reverse the process. I'm talking overall deflation, not specific items. For example, although electronic items have massively deflated (color TVs are about 5% what they cost in the 50's), this comes at a cost, which is a labor force that lives in significantly lower standards of living.

When I listened to my parents and grandparents describe The Great Depression, that's exactly what happened. Their overall standard of living decreased. My mom's family started making their own clothes, for example.
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Old 05-30-2023, 06:12 AM   #24
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So not sure how taxes on individuals have been "reduced" at higher income levels. It seems the opposite is in fact true.
lol Look at what the highest marginal rates used to be compared to what they are now.

https://www.taxpolicycenter.org/stat...come-tax-rates
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Old 05-30-2023, 09:39 AM   #25
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lol [emoji23] Look at what the highest marginal rates used to be compared to what they are now.

https://www.taxpolicycenter.org/stat...come-tax-rates
Doesn't matter. We used to have lots of offsetting deductions. Those are gone.

You have to look at what people are actually paying in taxes. Our federal tax system is the most progressive in the world. The highest income people pay just about all of the tax. The lower income people (about 50%) pay just about zero income tax. And it has grown more progressive even as rates have dropped.

I do not see how increasing the tax burden on high incomes (we did that) is contributing to a "wealth gap".
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Old 05-30-2023, 09:49 AM   #26
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Doesn't matter. We used to have lots of offsetting deductions. Those are gone.

You have to look at what people are actually paying in taxes. Our federal tax system is the most progressive in the world. The highest income people pay just about all of the tax. The lower income people (about 50%) pay just about zero income tax. And it has grown more progressive even as rates have dropped.

I do not see how increasing the tax burden on high incomes (we did that) is contributing to a "wealth gap".
Here is an article that argues the opposite interpretation. https://rooseveltinstitute.org/2017/...-in-the-1950s/
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Old 05-30-2023, 10:04 AM   #27
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Here is an article that argues the opposite interpretation. https://rooseveltinstitute.org/2017/...-in-the-1950s/
That article did not discuss a "wealth gap" at all. It discussed effective tax rates on the rich, with no discussion of same on non-rich.

Our tax system has become much more progressive in terms of what income levels pay the greatest proportion of federal income tax.

Not sure how that would create a "wealth gap".

Edit to add: a more middle of the road source would probably be more additive to the discussion in any event.
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Old 05-30-2023, 02:53 PM   #28
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Thanks. Jurgs01. I did not label your views. I simply pointed out that you were using taking points used by those who favor massive wealth redistribution. It seems that may not have been your intention.

I do not see the Austrian or Chicago schools or Milton Friedman advocating deflation as a viable monetary policy. Being critical of inflation is not the same as advocating deflation. We all desire price stability and low inflation.

And again I ask, please identify and quote any mainstream economist who shares your view that deflation is a desirable condition that should be encouraged.

I also note that you have not identified any thriving deflationary economies from the past 50 years as examples of your views working.
You are right they would not advocate specifically for deflation, but both would advocate for a more free market where price deflation or inflation could occur. The Austrians would either prefer a market money or gold-backed, while Friedman would be more of a 1% annual fixed money supply increase guy.

I can't provide mainstream economists because mainstream is a limiting factor. The whole profession is Keynesian (or MMT), and they wouldn't advocate for that. You are basically firewalling discussion with an appeal to authority logical fallacy.

To your last point, you are restricting to 50 years, and a time when the world transitioned into a period after Bretton Woods combined with removing the gold dollar backing to mke the base for all world curriencies fiat. Thus, the only time we get deflation is during a credit event or debt collapse. The artificial time constraint is unwise to get after the root of discussion.
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Old 05-30-2023, 04:27 PM   #29
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Doesn't matter. We used to have lots of offsetting deductions. Those are gone.

You have to look at what people are actually paying in taxes.
No, the tax code is full of deductions these days to benefit the wealthy.

Remember, Warren Buffet says he pays a lower effective tax rate than his secretary. That's not uncommon.

From the other reference posted: "And yes: effective tax rates on the rich were much higher in the 1950s than they are now."
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Old 05-30-2023, 05:27 PM   #30
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That article did not discuss a "wealth gap" at all. It discussed effective tax rates on the rich, with no discussion of same on non-rich.

Our tax system has become much more progressive in terms of what income levels pay the greatest proportion of federal income tax.

Not sure how that would create a "wealth gap".

Edit to add: a more middle of the road source would probably be more additive to the discussion in any event.
Of course not duh. How would an article on taxation rates directly answer that question. It couldn't possible anticipate the tangent this conversation has taken. Interesting as it seems any arguments outside the guard rails you have set are not additive to the discussion. Adios amigo.
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Old 05-30-2023, 05:39 PM   #31
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This entire discussion is outside the guard rails, and it started as an off topic segue from the inflation thread. Itís interesting, so letís keep it friendly.
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Old 05-30-2023, 05:53 PM   #32
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Corporate taxes are simply indirect taxes on individuals. Reducing them is probably progressive, but it definitely is necessary to keep jobs from leaving our shores as they did before tax reform.

If corporations are people, too, they need to pay their taxes. People who leave America still have to pay their US taxes.
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Old 05-30-2023, 11:29 PM   #33
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If corporations are people, too, they need to pay their taxes. People who leave America still have to pay their US taxes.
I think he is saying that corporations just pass on those taxes to consumers.
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Old 05-31-2023, 12:38 AM   #34
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No, the tax code is full of deductions these days to benefit the wealthy.

Remember, Warren Buffet says he pays a lower effective tax rate than his secretary. That's not uncommon.

From the other reference posted: "And yes: effective tax rates on the rich were much higher in the 1950s than they are now."
I agree that when marginal rates were higher, there were more deductions to offset income. Those were cut down dramatically by multiple layers of tax reform. So whatever deductions you feel the tax code is still full of, there are certainly far fewer than before. And the wealthy pay higher marginal rates and higher average rates than the rest of us, according to the Tax Foundation. So all those deductions for the wealthy you see are not sufficient to reduce tax rates and relative share of tax paid below those of the non-wealthy.

Secondly, lower income folks have been largely removed from the federal income tax rolls. 40-45% pay zero income tax. So when evaluating relative tax burden, you have to recognize federal income tax is zero for a very large swath of the population. Prior to the multiple rounds of tax reform, even lower income folks typically paid federal income tax.

Warren's statement, though provocative, was probably false. He probably makes most of his income as dividends and capital gains, which bear a lower tax rate than wages on average (because capital was previously earned and taxed). But as a high earner Warren probably still would have an effective rate much higher that his secretary since the top capital gain rate is a flat 20% plus the 3.8% rate on net investment income of high earners. So call it 24%

If his secretary's income put her in the top 25% of all taxpayers, her average effective rate would be only 17.1% according to the Tax Foundation.

https://taxfoundation.org/publicatio...come-tax-data/
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Old 05-31-2023, 05:52 AM   #35
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I agree that when marginal rates were higher, there were more deductions to offset income. Those were cut down dramatically by multiple layers of tax reform. So whatever deductions you feel the tax code is still full of, there are certainly far fewer than before. And the wealthy pay higher marginal rates and higher average rates than the rest of us, according to the Tax Foundation. So all those deductions for the wealthy you see are not sufficient to reduce tax rates and relative share of tax paid below those of the non-wealthy.

Secondly, lower income folks have been largely removed from the federal income tax rolls. 40-45% pay zero income tax. So when evaluating relative tax burden, you have to recognize federal income tax is zero for a very large swath of the population. Prior to the multiple rounds of tax reform, even lower income folks typically paid federal income tax.

Warren's statement, though provocative, was probably false. He probably makes most of his income as dividends and capital gains, which bear a lower tax rate than wages on average (because capital was previously earned and taxed). But as a high earner Warren probably still would have an effective rate much higher that his secretary since the top capital gain rate is a flat 20% plus the 3.8% rate on net investment income of high earners. So call it 24%

If his secretary's income put her in the top 25% of all taxpayers, her average effective rate would be only 17.1% according to the Tax Foundation.

https://taxfoundation.org/publicatio...come-tax-data/
Secretaries who make between $200-500k (plus spouse) are paying a hefty % of tax. I'm guessing she's at the top of this range from the 2012 articles' circulation. Hyperbole to make a point?
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Old 06-02-2023, 12:27 PM   #36
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I believe the secretary had to pay the full payroll tax on a much higher percentage of her income as well, and add her employer's share, which is really a tax on her. And then there's the state income taxes on top of that. I don't know about them, but it's a flat rate in my state for all regular income.

Right, those dividends and capital gains for wealthy people are taxed at a much lower rate than many middle class workers regular income who are struggling.
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Old 06-05-2023, 12:13 PM   #37
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I believe the secretary had to pay the full payroll tax on a much higher percentage of her income as well, and add her employer's share, which is really a tax on her. And then there's the state income taxes on top of that. I don't know about them, but it's a flat rate in my state for all regular income.
State income tax and payroll taxes were not part of the discussion.

This thread was moved out of the inflation thread in order to discuss deflation. Then it veered into wealth, then middle class not keeping up, then federal income tax, now payroll taxes and state income taxes.

I am wondering where we go next.

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Right, those dividends and capital gains for wealthy people are taxed at a much lower rate than many middle class workers regular income who are struggling.
Sure. But lower income folks pay lower capital gain tax rates than higher income folks do. Even a 0% capital gain rate not available to higher income folks.

That is one of the reasons low income folks pay no federal income tax in our system.

But the reason capital is taxed less is because it was already subject to tax when received as ordinary income. Then it is invested, and subject to taxes at the corporate level. Then it is paid out as a dividend after having been subject to multiple levels of prior taxation. That is the reasoning.

And as we know from the Tax Foundation, Warren very likely pays a much higher rate than zero.

If you research this, watch out for dishonest statements. Some sources will say "billionaire x has an effective income tax rate of 1.5%". But they are computing some estimate of taxes paid as a percentage of NET WORTH. We do not apply income tax to an individual's net worth in the US. In fact, that would be unconstitutional.

And of course, billionaires and other who feel undertaxed have an easy remedy: write a check to the US treasury. Such contributions are unlimited in dollar amount.
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Old 06-05-2023, 01:44 PM   #38
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While some items are going down in price, I see no overall deflation in the overall cost of living.
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