Are you the 9.9%?

[LOL!]

Are there equivalent education tax breaks for families that do not have children and for families that don't send their 17-24 year-olds to college? Last I checked not everyone in that age group goes to college and even if many do, a lot of them never graduate.

I believe that for every $2,000 tax break that a family received to pay for college, colleges simply raised the price by $2,000. I think much of the extra inflation in college education pricing has come from these tax breaks.

You know, the law of unintended consequences.

And I have paid for 3 college educations: My own and those of my children.

 

[Mdlerth]

Fixing economic inequality is simple: just play Robin Hood

Regardless of whether:

• the article's reasoning is wisdom or foolishness; or
• the author is intellectually sharp or indolent; or
• its underlying postulate that inequality = bad even has merit;

its predictable conclusion comes down to The Money Grab.

To clarify what the article is criticizing and in answer to what some others have asked about what the Atlantic article proposes as solutions (for those who didn't get through the admittedly long read), I think the majority of it boils down to ending tax breaks of various kinds...

Sure sounds like The Money Grab to me.

 

[Dtail]

Edit to add: One more point I wanted to make/ask, you aren't seriously telling us to bypass those benefits, are you? I'm not going to be the lone sucker who doesn't take fair advantage of tax breaks. Change the rules if you don't want me to have them, but don't tell me to not use them when I can be pretty certain others will continue to.

Exactly. OTOH, some on this site are against the usage of irrevocable trusts to minimize LTC costs, plus to a much lesser extent the management of MAGI for ACA subsidies.
Change the rules, otherwise.......

 

[pb4uski]

.....I think the majority of it boils down to ending tax breaks of various kinds that go far disproportionately to the wealthy. Things that sounds good on paper but end up being welfare for the rich. For example, tax breaks on employer-sponsored health plans, home mortgage interest deductions, lower tax rates on capital gains, 529 savings, etc. These are all breaks that in theory every citizen can benefit from, but in reality only the wealthy are able to make use of. And because all these benefits are based on percentages, the more money you have that falls into these categories the more you benefit. On the surface sounds fair (because anyone could take advantage of them), and incentivizing the right behavior, but in reality ends up only helping exactly the people who don't need help. ....

All true, but at the end of the day all these incentives do is to reduce the overall taxes of those who utilize them so the net impact is simply to incentivize the wealthy to invest and spend their money in certain ways, but the wealthy still pay more in tax than those who can't benefit from those incentives, so I don't see what the problem is.

So in the author's view if we got rid of all these incentives and made a corresponding reduction to tax rates so the net taxes collected from 'the wealthy" was the same then all would be ok? If so, then perhaps in interesting idea... if not, then a definite money grab.

 

[iloveyoga]

.

Getting a "good" job without a degree - today - is harder than it was 30,40,50 years ago.

I don't let articles tell me how I should feel. I know for myself what it took, and where I benefited from my starting position. But if I was 20 today.. would I get that nice salaried starting position in a Fortune500 co with no degree? I doubt it.

This is how I got my start - working at a large insurance/financial services company.

 

[mpeirce]

As long as people are people, there will ALWAYS be this type of economic divide. To what degree people believe it is unfair is a matter of personal judgement, which will always have personal bias.

Reading that article just reinforces my belief that there are many folks who are terribly embarrassed that humans behave the way we do. They want us to change to conform to their view of fairness and equality. And we just don't.

 

[HtownRose]

"Things that sounds good on paper but end up being welfare for the rich. For example, tax breaks on employer-sponsored health plans..."

I would love to see the advantage of employer-sponsored health insurance go away - it's the only reason I'm working so I'd retire as soon as it went into effect!

But I don't understand the idea that only the rich benefit from tax breaks on them - without the tax breaks, wouldn't most employers either discontinue offering health insurance, or stop subsidizing it, leaving the employees, many if not most of whom are not rich, to pay much more for health insurance?

 

[NYEXPAT]

I thought this was a poll. But, for the record I am in the 9.9%. Unlike most here, I had to spend a lot of money on wine and women and retire at 34 to get here!

 

[NW-Bound]

... Heck, being born a Caucasian (even, like me, a female Caucasian in a working-class family where the water heater was turned off between showers to save money) is a significant, unfair, unearned advantage...

Eh, when RV'ing I turn off the water heater between showers to conserve propane.

Maybe I should look into doing the same at home with the electric water heater.

 

[jollystomper]

In regards to a college education, while many say things are harder about college these days, I think it is worth pointing out that there are many things about college that are easier than 40 years ago. A few things come to mind are technology to leverage ones workload, a wider range of majors to choose from, much better academic and non-academic facilities. GPA trends are higher. Of course, one can debate if these also fall into the category of "it is not what you have, it is what you do with it" when it comes to leveraging these items to take the best advantage of them, for a path beyond college.

 

[HI Bill]

I fail to see how our hard work, refusing to get into trouble, and LBYM ethics (even when the "means" were barely enough to get by) constitute something "toxic," as the article's opening lines have it.

I completely agree. I was not born with a golden spoon in my mouth, I was born (fortunately), to parents who loved me. My dad was the sole breadwinner, an elementary school teacher. We had a VW bus and bug, but rented a house in a poor, small community. It wasn't until my mom started teaching after I went off to school, that our financial lot improved at all. My dad committed to paying for my college, but when I was ready to start, his savings weren't there yet. So I went to community college. This was the stroke of good fortune that helped me catch up in my rather deficient math skills. I started with algebra, then pre-calc, then 3 semesters of calc...but I digress. My parent's influence, support, and their paying for most of my college helped me start off on the right foot. As I finished college debt-free (not a fancy, ivy-league college, but an inexpensive, practically oriented state college), I was unemployed for 6 weeks, while looking for a job. That was my only period of unemployment in the past 27 years. Since then, I've LBYM, never going into debt, except for two car purchases, and three condo purchases. I've never received a day of unemployment pay, nor a day of welfare. I've only paid interest to a credit card company on one month for one card. I've made choices to save, invest, and grow my money, rather than work the rest of my life. I'm proud that through the combination of my 'accident of birth', hard work, a lot of luck, and a lot of judgement, has allowed me to make it to the top 9.9% (more like top 5%). I owe no one apologies for this. My coworkers with similar or better education and pay are still working, 1 to 2 decades past the age 53 that I'll be next year, when I plan to retire. It's all about choices. Oh, and not having lots of kids helped!

 

[HI Bill]

Maybe I should look into doing the same at home with the electric water heater.

It's called a water heater timer. I have mine set to automatically turn the water heater on for 2 hours in the morning, and 2 in the evening. The other 20 hours a day, it's off.

 

[aja8888]

Eh, when RV'ing I turn off the water heater between showers to conserve propane.

Maybe I should look into doing the same at home with the electric water heater.

Why not install a 55-gallon polyethylene drum on your roof and plumb the water heater input to it to preheat the water going into the water heater? Or just remove the water heater and use the hot water from the drum?

 

[ERD50]

If it's at all possible to keep this thread from going off the rails,

... I think the majority of it boils down to ending tax breaks of various kinds that go far disproportionately to the wealthy. Things that sounds good on paper but end up being welfare for the rich. For example, tax breaks on employer-sponsored health plans, home mortgage interest deductions, lower tax rates on capital gains, 529 savings, etc. These are all breaks that in theory every citizen can benefit from, but in reality only the wealthy are able to make use of. ....

I'm against just about all 'carve outs' and subsides/incentives, but your argument appears to be pretty hollow when we throw some facts against it:

https://www.ntu.org/foundation/page/who-pays-income-taxes

The top 10% in AGI paid over 70% of all the Federal Income Tax paid by everyone. I'm not even sure if they adjust for people who receive credits (negative FIT).

I know, FIT isn't the only tax collected, but it's a big chunk. And 10% paying 70% doesn't exactly sound like they've done a great job at gaming the system.

.... Other suggested solutions include changing regressive payroll tax system ....

I don't think SS can be legitimately described as 'regressive'. True, you are not paying after a certain income point in the year, but you receive no credits either. And the payout is very 'progressive', so the buy-in is as well.

-ERD50

 

[ERD50]

It's called a water heater timer. I have mine set to automatically turn the water heater on for 2 hours in the morning, and 2 in the evening. The other 20 hours a day, it's off.

Ironically, a water heater comment had to pass the "HOT BUTTON" warning ...

But I was going to say (carefully now), that the timer probably isn't saving you much (if at all). Modern electric water heaters are well insulated, they lose very little heat when they are idle. The major cost is raising the water temperature in the first place.

Also, even though it may be 'off', it's still losing heat, and that will be made up when the timer kicks back in. But it might not even lose enough heat during the idle time to cycle the heat back on anyhow.

The only actual difference is that if it is set for 130F, and lets say it comes on at 125F, then, if (big if) it would have dropped to say 120F during the timer off time, then the average temperature is 125F (130:120), whereas the average temperature w/o a timer would be 127.5F (130:125). And the rate of heat loss would be slightly higher at a 127.5F average temperature than it would at 125F average temperature. Emphasis on slightly. Like, maybe immeasurable?

-ERD50

 

[samclem]

But I was going to say (carefully now), that the timer probably isn't saving you much (if at all).

The timer would save only an insignificant amount of electricity, but could save a lot of money if the utility rates vary over the day. Avoiding the high rate period could be worth a lot.

 

[Mr._Graybeard]

I suspect that the "good union jobs" you could get over the summers when you were in school are gone now. ...

The reference to "good union jobs" reminded me of some of my summer employment at the gray-iron foundries in the Milwaukee area. Foundry jobs were pretty easy to get, and they paid well. But you worked like a dog. Turnover was high, and guys in their 30s were old-timers.

I remember my paychecks grossing around $150 a week -- damn good money for a 19-year-old kid. It was a union shop. But boy, was it a good job? I couldn't wait until I didn't have to punch that clock.

 

[flintnational]

I would be more impressed if the author said, "We are generous but we can do more".

Yea, I got up way too early just to post this.

Differing from the author, I prefer to use math instead of emotion to determine fairness. The math is as follows:

US population 327,000,000
Annual State, local and Federal governmental revenue $6T*
Annual share per each man, woman and child in the US $18k

So, an average family of 2.5 owes $45K ($18k x 2.5) annually just to cover their share of the costs to run the country. Median family income is currently $60k. Using this measure of fairness, obviously a large number of Americans are not paying their fair share. (Fairness/privilege was the author's premise not mine.)

The numbers above would seem to indicate, as a society, we do a pretty good job of shifting societal costs to the wealthy and away from the poor. But, to authors like this it will never be enough. His idea of fairness is sameness. And as others have pointed out, that is not the human condition.

*Defecit spending puts the number closer to $7T. The above excludes US annual charitable giving of about $390B, with the cost falling mostly to the wealthy and the benefit mostly to the poor or society in general.

 

[RunningBum]

You're defining "fair share" as an equal amount, not an equal percentage as most would. It's absurd to say the fair share of a family making $40K is for them to pay $45K in taxes.

A more accurate way to look at it would be using the ntu link ERD posted earlier. I can't get the tables I want to format right so I'll just refer to the link again, https://www.ntu.org/foundation/page/who-pays-income-taxes

Even that link shows it a little skewed. The top 1% pays a disproportionate share and that gets added into the other groups up to the top 50% and skews those grows. The right think to look at is the AGI in the group, and the tax share by that group alone.

Group AGI Share Tax share paid

Top 1%

AGI 20.65

Tax share 39.04

1-5%

AGI 15.42

Tax Share 20.54

5-10%

AGI 11.29

Tax Share 11.01

10-25%

AGI 21.63

Tax Share 16.03

25-50%

AGI 19.73

Tax Share 10.55

Bottom 50%

AGI 11.28

Tax Share 2.83

Sorry, I couldn't get that to format nicely and I've spent enough time trying.

As you can see, 1-5% pays only a little more than their share, and 5-10% is actually very slightly under. Below that is even less.

 

[scrabbler1]

"Things that sounds good on paper but end up being welfare for the rich. For example, tax breaks on employer-sponsored health plans..."

I would love to see the advantage of employer-sponsored health insurance go away - it's the only reason I'm working so I'd retire as soon as it went into effect!

But I don't understand the idea that only the rich benefit from tax breaks on them - without the tax breaks, wouldn't most employers either discontinue offering health insurance, or stop subsidizing it, leaving the employees, many if not most of whom are not rich, to pay much more for health insurance?

I don't see why employers would stop offering subsidized health insurance if the employer subsidy became taxable income to the employees. How would the employer's bottom line be affected, as long as the value of the subsidy were not subject to FICA taxes. Ending the tax-exempt nature of the subsidy would begin to even out the tax treatment of health insurance premiums between those in employer plans and those in the individual market.

 

[mrWinter]

And if that's the author's point, why get into calling us a toxic part of the problem and taking other potshots?

I didn't read the article as calling individual people toxic, instead saying the system is toxic, and of course individual people are part of that system. I'm one of the discussed cohort and took no offense personally. It seems others interpreted that differently. Agree that the article would likely have attracted more serious readers if not starting out by making some people feel defensive. The author addresses that point later in the article but it may be well too late by then.

Edit to add: One more point I wanted to make/ask, you aren't seriously telling us to bypass those benefits, are you? I'm not going to be the lone sucker who doesn't take fair advantage of tax breaks. Change the rules if you don't want me to have them, but don't tell me to not use them when I can be pretty certain others will continue to.

No I'm definitely not suggesting that and don't think the author is, and thought I had gone out of my way to get that point across in another post. Agree with you, doing so would only harm yourself to no benefit of the whole, tragedy of the commons. Hence pleading with individuals is worthless, the system as a whole needs to be modified.

 

[mrWinter]

All true, but at the end of the day all these incentives do is to reduce the overall taxes of those who utilize them so the net impact is simply to incentivize the wealthy to invest and spend their money in certain ways, but the wealthy still pay more in tax than those who can't benefit from those incentives, so I don't see what the problem is.

So in the author's view if we got rid of all these incentives and made a corresponding reduction to tax rates so the net taxes collected from 'the wealthy" was the same then all would be ok? If so, then perhaps in interesting idea... if not, then a definite money grab.

Right, wealthier citizens pay more in taxes, but also get more of these credits back. The result being that their effective tax rate is lower than whatever tax bracket they are in, thus the system isn't as progressive as it may look on paper. I think the author is not suggesting keeping things even, by reducing credits and also reducing base tax rate, but just getting rid of the credits. Yes this would be an effective increase in taxes to the wealthy.

 

[NW-Bound]

Sorry for the temporary thread hi-jack, and I promise this is the last one (on this thread ).

It's called a water heater timer. I have mine set to automatically turn the water heater on for 2 hours in the morning, and 2 in the evening. The other 20 hours a day, it's off.

When I made the above joke and off-hand comment, I forgot that I already had a timer wired to the heater. And I have had this for years.

The timer would save only an insignificant amount of electricity, but could save a lot of money if the utility rates vary over the day. Avoiding the high rate period could be worth a lot.

And the above is partially the purpose of the timer as I have demand rate for electric usage. Off-peak rate is 7.30c/kWh, and on-peak is as high as 22.15c/kWh. So, I coast through the on-peak by turning off the heater, and avoiding taking showers.

Why not install a 55-gallon polyethylene drum on your roof and plumb the water heater input to it to preheat the water going into the water heater? Or just remove the water heater and use the hot water from the drum?

Another reason for the timer was to not turn on the heater during daylight, so that the solar panel had a chance to do its job. Sadly, that solar water system has been out of commission for a few years, and I need to repair it.


OK, we are back to regular programming.

And to tie into the thread, the above is just one of the few things I do to be economical, yet not really impact my lifestyle, so that I could be in the 9.9%.

 

[ERD50]

Another viewpoint for me is, why should anyone be surprised that the top 10% make much more than the bottom 50%?

Consider if you met with the top 10% of a large high school graduating class. And remember that 1 of 10 of these people would be the top 1%. They will generally be a pretty impressive group. Not only 'smart', but goal oriented, motivated, and know how to "play by the rules" to achieve success.

And the comparison is not to the bottom 50% of the class - you need to include drop-outs and a few that might be incarcerated. Yes, I would expect the top 10% group to do much, much better on average than the average of the bottom 50% group.

And what if we didn't allow the top 10% to enjoy the rewards of their hard work (and yes, some is due to 'luck'/circumstance, but typically hard work has to be part of the mix)? Would the bottom 50% be as motivated to try to do better for themselves, if they didn't see any significant pay-back? I'm pretty sure most of us as children (unless maybe if you were in a higher 1% family) have seen a neighborhood of finer homes than we lived in, and part of our thought process was "what do these people do to afford such nice homes"? And doesn't that make us think about what we might need to do if we ever wanted such a nice home?

Be careful what you wish for. Level the playing field too much, and I do think you will be stripping away motivation for a lot of people. Not that there aren't extremes that we can point to and easily consider 'unfair', but no system is perfect.

Go and tell the Freshman high school class that it's fine if they want to get good grades, but there won't be any recognition, it won't help them get into a better college, and it won't help them to raise their standard of living - because that would be toxic to the kids who don't do as well, and you would be creating that problem (paraphrasing the sub-title of the article), and we need to start 'fixing' it now.

Now there's some motivation for you!

-ERD50

 

[Lsbcal]

I much prefer the water heater discussion. So please let’s stick to that.