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To Understand Rising Inequality, Consider Janitors

nytimes.com

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Re: To Understand Rising Inequality, Consider Janitors

#251

Post by lend000 »

choxi wrote: post #180

We should tax wealth, not income. [1] The majority of income the top 0.1% make is from investments and gets taxed as capital gains, only about 15% of their income is taxed as ordinary income. [2][3] We have an economic system where it's dramatically easier to make money the more money you already have. If you have $50M, you can park it in an index fund to get 4% returns and make $2M every year just off of your invest…

Easier said than done -- not all wealth is liquid. What if someone has all their wealth in one or two real estate properties? Or a family heirloom gem collection which is worth a lot but which they refuse to sell (and otherwise are not wealthy)?

Re: To Understand Rising Inequality, Consider Janitors

#252

Post by cjlars »

choxi wrote: post #180

We should tax wealth, not income. [1] The majority of income the top 0.1% make is from investments and gets taxed as capital gains, only about 15% of their income is taxed as ordinary income. [2][3] We have an economic system where it's dramatically easier to make money the more money you already have. If you have $50M, you can park it in an index fund to get 4% returns and make $2M every year just off of your invest…

For the sake of completeness. Top capital gains rate is 20% + 3.8% medicare surcharge + state tax. In a high tax state like California, you're paying 37.1% on investment income, not 15%. Also, top federal rate is 39.6%, not 35%, plus state income tax, you can pay as high as a statutory rate of 52.9% in CA, or around 47% after deductions.

And more to your point, we already have a defacto wealth tax in the US because inflation is not deductible. If you hold a bond paying 2% per year, and inflation is also 2% per year, you pay tax on those gains even though you've made a post-tax loss in purchasing power. At 2% long term inflation, the defacto wealth tax works out to be the 2% multiplied by your capital gains rate, or from 0.47% to 0.74% for high earners depending on what state they live in.

Re: To Understand Rising Inequality, Consider Janitors

#253

Post by _delirium »

microcolonel wrote: post #237
JamesBarney wrote: post #219

Earlier quoted context omitted.

Taxation is both effective, and far less invasive to markets than many other solutions.(like minimum wages, enforced labor unions, changing the way companies pick or compensate CEOs). So that's why it's brought up so often. What are some solutions you're aware of that are equally effective and less invasive?

> Taxation ... minimum wages, enforced labor unions, changing the way companies pick or compensate CEOs None of these are solutions to inequality. Tax-backed redistribution efforts (think new deal) have had no measurable positive impact on absolute or relative poverty; nor have minimum wage laws. The idea of corrupting the CEO compensation and hiring practice at the national level is about as boneheaded as they come.…

Strong social safety nets of the Scandinavian variety do reduce post-transfer poverty (less so inequality), mostly by truncating the bottom of the income curve with a floor. You can get rid of poverty pretty much by definition if you have sufficient income transfers so that everyone's income is above the povery line. E.g. if your national poverty line is $13k, if you guarantee $13k incomes, no more poverty, at least by that measure. Works a bit better in practice if you also have an integrated social worker system, so you can figure out e.g. if someone is homeless due to purely lack of income or mental health or other illness and direct them appropriately.

Re: To Understand Rising Inequality, Consider Janitors

#254

Post by avasylev »

conanbatt wrote: post #200
choxi wrote: post #180

We should tax wealth, not income. [1] The majority of income the top 0.1% make is from investments and gets taxed as capital gains, only about 15% of their income is taxed as ordinary income. [2][3] We have an economic system where it's dramatically easier to make money the more money you already have. If you have $50M, you can park it in an index fund to get 4% returns and make $2M every year just off of your invest…

Maybe we should stop thinking taxes are the solution to inequality. "Cutting all the high trees so the forest looks even".

Funny that comparison with the trees can be applied in a different way - you do need to cut high trees if you want to grow smaller trees in the same place.

This spring I cut very high pine because it shadowed my entire backyard and I want to grow more smaller trees on the perimeter.

Re: To Understand Rising Inequality, Consider Janitors

#255

Post by microcolonel »

_delirium wrote: post #253
microcolonel wrote: post #237

Earlier quoted context omitted.

> Taxation ... minimum wages, enforced labor unions, changing the way companies pick or compensate CEOs None of these are solutions to inequality. Tax-backed redistribution efforts (think new deal) have had no measurable positive impact on absolute or relative poverty; nor have minimum wage laws. The idea of corrupting the CEO compensation and hiring practice at the national level is about as boneheaded as they come.…

Strong social safety nets of the Scandinavian variety do reduce post-transfer poverty (less so inequality), mostly by truncating the bottom of the income curve with a floor. You can get rid of poverty pretty much by definition if you have sufficient income transfers so that everyone's income is above the povery line. E.g. if your national poverty line is $13k, if you guarantee $13k incomes, no more poverty, at least…

> Strong social safety nets of the Scandinavian variety do reduce post-transfer poverty (less so inequality)

Granted Scandinavian countries, now more just Norway and Denmark, tend to have very low potential for poverty in general. The rate would likely be comparatively low even without the programmes. Norway and Denmark have both considerably reduced entitlements over the years to relieve the enormous stress they put on the economy.

Well before any of these programmes became so comprehensive, Norway, Denmark, and Sweden were very productive and comparatively equal.

Re: To Understand Rising Inequality, Consider Janitors

#256

Post by magoghm »

aninhumer wrote: post #239
magoghm wrote: post #197

Earlier quoted context omitted.

Look at this chart, you can see that inflation started to increase really fast since the 70's: http://www.wolframalpha.com/input/?i=1000+1776+dollars+in+20... (sometime WolframAlpha doesn't display the chart you might need to reload the page until it does, then click on the button that say "Linear scale" to display in a linear scale instead of a log scale)

Looking linear graph of an exponential process and seeing an apparent rapid increase at a certain point doesn't really prove anything. That's just what an exponential graph looks like. If I instead look at the log graph, it looks more like the value of currency was approximately stable before 1900, and then started to trend upwards some time after that. I'm not sure how to interpret that, but if you were intending to…

When I look at the average rate of inflation from 1900 10 1970, it is 2.26% per year: http://www.wolframalpha.com/input/?i=1000+1900+dollars+in+19...

And when I look at the average rate of inflation from 1970 to 2017, it is 4.01% per year: http://www.wolframalpha.com/input/?i=1000+1970+dollars+in+20...

Both of them are exponential growths, but with quite different rates.

Re: To Understand Rising Inequality, Consider Janitors

#257

Post by gok »

cjlars wrote: post #252
choxi wrote: post #180

We should tax wealth, not income. [1] The majority of income the top 0.1% make is from investments and gets taxed as capital gains, only about 15% of their income is taxed as ordinary income. [2][3] We have an economic system where it's dramatically easier to make money the more money you already have. If you have $50M, you can park it in an index fund to get 4% returns and make $2M every year just off of your invest…

For the sake of completeness. Top capital gains rate is 20% + 3.8% medicare surcharge + state tax. In a high tax state like California, you're paying 37.1% on investment income, not 15%. Also, top federal rate is 39.6%, not 35%, plus state income tax, you can pay as high as a statutory rate of 52.9% in CA, or around 47% after deductions. And more to your point, we already have a defacto wealth tax in the US because i…

Nit: That 52.9% number isn’t quite right because you get to deduct your CA income tax against your federal income tax. So in practice even if you made a billion dollars in California, you’d pay $133M to the state then get federally taxed 39.6% on the remaining $867M, giving you an effective tax rate of about 47%.

Re: To Understand Rising Inequality, Consider Janitors

#258

Post by cjlars »

gok wrote: post #257
cjlars wrote: post #252

Earlier quoted context omitted.

For the sake of completeness. Top capital gains rate is 20% + 3.8% medicare surcharge + state tax. In a high tax state like California, you're paying 37.1% on investment income, not 15%. Also, top federal rate is 39.6%, not 35%, plus state income tax, you can pay as high as a statutory rate of 52.9% in CA, or around 47% after deductions. And more to your point, we already have a defacto wealth tax in the US because i…

Nit: That 52.9% number isn’t quite right because you get to deduct your CA income tax against your federal income tax. So in practice even if you made a billion dollars in California, you’d pay $133M to the state then get federally taxed 39.6% on the remaining $867M, giving you an effective tax rate of about 47%.

Good point, updated. It would be further impacted by AMT and the standard deduction thresh-hold, but that's a good estimate I think.

Re: To Understand Rising Inequality, Consider Janitors

#259

Post by JamesBarney »

microcolonel wrote: post #255
_delirium wrote: post #253

Earlier quoted context omitted.

Strong social safety nets of the Scandinavian variety do reduce post-transfer poverty (less so inequality), mostly by truncating the bottom of the income curve with a floor. You can get rid of poverty pretty much by definition if you have sufficient income transfers so that everyone's income is above the povery line. E.g. if your national poverty line is $13k, if you guarantee $13k incomes, no more poverty, at least…

> Strong social safety nets of the Scandinavian variety do reduce post-transfer poverty (less so inequality) Granted Scandinavian countries, now more just Norway and Denmark, tend to have very low potential for poverty in general. The rate would likely be comparatively low even without the programmes. Norway and Denmark have both considerably reduced entitlements over the years to relieve the enormous stress they put…

I think we can agree "when you give poor people money to spend, they don't end up spending more money" is an extraordinary claim. And so should need an extraordinary amount of evidence to back it up. Can you point me in the right direction to some more information about how this could possibly be true?

Re: To Understand Rising Inequality, Consider Janitors

#260

Post by aninhumer »

magoghm wrote: post #256
aninhumer wrote: post #239

Earlier quoted context omitted.

Looking linear graph of an exponential process and seeing an apparent rapid increase at a certain point doesn't really prove anything. That's just what an exponential graph looks like. If I instead look at the log graph, it looks more like the value of currency was approximately stable before 1900, and then started to trend upwards some time after that. I'm not sure how to interpret that, but if you were intending to…

When I look at the average rate of inflation from 1900 10 1970, it is 2.26% per year: http://www.wolframalpha.com/input/?i=1000+1900+dollars+in+19... And when I look at the average rate of inflation from 1970 to 2017, it is 4.01% per year: http://www.wolframalpha.com/input/?i=1000+1970+dollars+in+20... Both of them are exponential growths, but with quite different rates.

And for 1970 to 1980 it's 7.82% per year: http://www.wolframalpha.com/input/?i=1000+1970+dollars+in+19...

As I said, there was a surge around 1970, so yes, if you take a period that includes that surge, it will probably have a higher rate than one that does not.

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