Wealth Distribution in the US: Challenges and Solutions

[BoomBoom]

This is somewhat of a spinoff from another thread about Fox News in which the discussion turned to policies that are perceived as “pro-rich” or “pro-working class and poor”.

Now it is well known that in the U.S. a mere 5% of the population holds the majority of the wealth. The majority of Americans struggle to pay their bills. Much of the wealth that the top 5% receives comes from the ‘struggling masses’. I will use this story as a backdrop:http://www.ft.com/cms/s/0/43d18c68-851d-11de-9a64-00144feabdc0.html"

US banks stand to collect a record $38.5bn in fees for customer overdrafts this year, with the bulk of the revenue coming from the most financially stretched consumers amid the deepest recession since the 1930s, according to research. The fees are nearly double those reported in 2000.

This example is only in reference to overdraft fees, but lower income people are also continually hit with late fees, interest rate penalties, and they generally pay much higher interest rates for everything they buy on credit than do those who are better off financially. Often they must resort to check-cashing/payday-loan places in order to pay bills to avoid discontinued service or eviction and the charges at these places are insane.

Pay and compensation is generally very lopsided with top execs making up to thousands of times more than lower level management as well.

Given the uneven distribution of wealth, I believe that the re-distribution of wealth through mechanisms such as progressive tax codes, higher minimum wages, universal healthcare, tuition assistance, etc. (and the like) are not only warranted, but necessary for a better, more fair society in which everyone is better off, IMO.

But what do I know, I’m just a “bleeding-heart liberal”. Flame on…

 

[kyleb]

I made a somewhat similar spin-off thread while you posted yours, but I suppose they are enough different to exist on their own. So anyway:

Given the uneven distribution of wealth, I believe that the re-distribution of wealth through mechanisms such as progressive tax codes, higher minimum wages, universal healthcare, tuition assistance, etc. (and the like) are not only warranted, but necessary for a better, more fair society in which everyone is better off, IMO.

We could also reign in the money supply to increase the value of each dollar, and let the market adjust from there. Not being a "bleeding-heart liberal" or a "cutthroat conservative", I think a combination of the two would work best in the long run.

 

[Jasongreat]

This is somewhat of a spinoff from another thread about Fox News in which the discussion turned to policies that are perceived as “pro-rich” or “pro-working class and poor”.

Now it is well known that in the U.S. a mere 5% of the population holds the majority of the wealth. The majority of Americans struggle to pay their bills. Much of the wealth that the top 5% receives comes from the ‘struggling masses’. I will use this story as a backdrop:http://www.ft.com/cms/s/0/43d18c68-851d-11de-9a64-00144feabdc0.html"

Do you think all the monopolies that gave these top 5% their wealth, could exist without the government backing them? Maybe the majority of americans should reduce their bills, then they wouldn't be struggling. And as an added bonus, if the majority of americans lived within their means, they would hold the government to the same.

This example is only in reference to overdraft fees, but lower income people are also continually hit with late fees, interest rate penalties, and they generally pay much higher interest rates for everything they buy on credit than do those who are better off financially. Often they must resort to check-cashing/payday-loan places in order to pay bills to avoid discontinued service or eviction and the charges at these places are insane.

Why do they get hit with all these fees? Improper money management? Sounds like a little education on the proper use of money, might go along way. How will giving them free money help? If they can't manage what they have, more won't help.

Pay and compensation is generally very lopsided with top execs making up to thousands of times more than lower level management as well.

Well you won't get me to argue that all top CEO's have earned their money, if more of them did we wouldn't of "had" to bail them out. I don't believe in intervention to save the companies or the workers, failure is a great teacher. Giving a bailout only made the problem worse, if they had been allowed to fail, all companies that followed would realize they have to compete. Just to clarify, I believe in the free market being allowed to work in both directions.

Given the uneven distribution of wealth, I believe that the re-distribution of wealth through mechanisms such as progressive tax codes, higher minimum wages, universal healthcare, tuition assistance, etc. (and the like) are not only warranted, but necessary for a better, more fair society in which everyone is better off, IMO.

But what do I know, I’m just a “bleeding-heart liberal”. Flame on…

It does sound like a simple solution, but it won't work anywhere but on paper. If you raise the tax on the rich and companies, they will just raise their prices and then when the struggling poor go to buy products, the pay raise you gave the poor just goes right back to the rich. If you took all the money from the rich and gave it to the poor, within a short amount of time the rich would have it all back. Why is this? Because being rich and being poor isn't caused by money, its caused by a difference in education regarding money. The rich understand how to use money to their advantage, the poor allow themselves to get used by money to their disadvantage.
A fair society is one that allows some to steal from others in the society?
Since most in this forum are from academia let me try this analogy: Do all people graduating in your class get the same grades? Why is that? Would you think it fair to have your A reduced to a C so that a classmate can move from an F to a C? Would you still work as hard for an A if you knew it could be stolen by the guy who spent all his free time wastefully, while you sacrificed and stayed home to study everynight?

All the above statements by me are just my opinion, even if I choose to attach links that agree with me, it is still just my opinion.

 

[kyleb]

If you raise the tax on the rich and companies, they will just raise their prices and then when the struggling poor go to buy products, the pay raise you gave the poor just goes right back to the rich.

That would give the not rich a better opportunity to offer other products which undercut those offered by the rich.

A fair society is one that allows some to steal from others in the society?

A fair society would be one that doesn't allow the rich to steal from the rest of us under the guise of being "too big to fail".

 

[rootX]

I support helping students and providing them more opportunities so that their skills are good and they are strong in global dynamic market.

1) But, people who don't deserve wealth shouldn't get it.
2) People who deserve, should get it

Universal health care is neither simple nor easy to have.
Higher minimum wage wouldn't help much and it might raise the unemployment.

 

[Jasongreat]

I made a somewhat similar spin-off thread while you posted yours, but I suppose they are enough different to exist on their own. So anyway:

We could also reign in the money supply to increase the value of each dollar, and let the market adjust from there. Not being a "bleeding-heart liberal" or a "cutthroat conservative", I think a combination of the two would work best in the long run.

I am all for that, however good luck getting most people to agree. It seems to me for some reason people fight tooth and nail to keep the inflated dollars, it just happened before the bailout I heard "we have to do this thing to save us from deflation" on a few nescasts. IMO deflation is the best thing that could happen in an inflated market. If tommorrow the government said the dollar was worth 10x what it was today($1000000 becomes $100000), even though the dollar would be stronger and even though they still had the same buying power(in country and more buying power outside), since everyone elses dollars changed the same, I think you would hear very loud protests. $100000 just doesn't look as good as $1000000, even if they are worth the same. That being said it is a great idea IMHO.

the preceeding was just my opinion.

 

[Office_Shredder]

I am all for that, however good luck getting most people to agree. It seems to me for some reason people fight tooth and nail to keep the inflated dollars, it just happened before the bailout I heard "we have to do this thing to save us from deflation" on a few nescasts. IMO deflation is the best thing that could happen in an inflated market. If tommorrow the government said the dollar was worth 10x what it was today($1000000 becomes $100000), even though the dollar would be stronger and even though they still had the same buying power(in country and more buying power outside), since everyone elses dollars changed the same, I think you would hear very loud protests. $100000 just doesn't look as good as $1000000, even if they are worth the same. That being said it is a great idea IMHO.

the preceeding was just my opinion.

Deflation is scary. If the value of the dollar tomorrow was worth 10 times what it is today, EVERYBODY who has invested money in anything would go bankrupt. People who socked away all their money in cash would gain a 10x monetary advantage on people who spent their money on, you know, things. And by things I don't mean 60" TVs and new cars, I mean investing in companies, spending money to improve a company you own, even local governments spending on infrastructure improvements. With deflation, it becomes more fiscally sensible to keep all your assets in cash rather than invest in things, and that means the economy stops.

 

[Jasongreat]

That would give the not rich a better opportunity to offer other products which undercut those offered by the rich.

I don't see how. Can you explain further? As I see it the not rich can already undercut the wealthy easily, since they don't have near the overhead the rich do. That is as long as the government doesn't put oppressive regulatory hurdles in front of them, to protect the all ready rich like government likes to do.

A fair society would be one that doesn't allow the rich to steal from the rest of us under the guise of being "too big to fail".[/

QUOTE]

I agree. But I don't see much difference between the government stealing from the poor to save the rich, and stealing from the rich to save the poor. It is still just theft, either way. Its just popular to demonize the rich, and politically incorrect to criticize the poor.

Still just my opinion nothing more.

 

[Vanadium 50]

in the U.S. a mere 5% of the population holds the majority of the wealth.

True, but misleading. The people in percentiles 2-5 look a lot more like the people in percentiles 5-10 than in the top 1%. The people in the 5-10% range own 20% of the wealth, or 4x the average. The people in the 2-5% range own about 15% of the wealth, or about 5x the average. The people in the top 1% own about 35% of the wealth, or about 35x the average.

If you look at the 30th (or so) to 98th percentile, you'll see a strong correlation of wealth with age. People work and save and thereby become wealthier over time.

However, you might want to rethink your solution. I remember a time not long ago when people were making the same argument, only about mortgages. It was considered unfair that people who already had money could get mortgages, but that poor people were unable to get them, and thus couldn't benefit from owning a house - an asset that was practically guaranteed to appreciate. So, to solve this problem, there was an invention called "subprime lending" promoted by the Community Reinvestment Act. And while the intent was good, the outcome was not.

 

[Jasongreat]

Deflation is scary. If the value of the dollar tomorrow was worth 10 times what it is today, EVERYBODY who has invested money in anything would go bankrupt. People who socked away all their money in cash would gain a 10x monetary advantage on people who spent their money on, you know, things. And by things I don't mean 60" TVs and new cars, I mean investing in companies, spending money to improve a company you own, even local governments spending on infrastructure improvements. With deflation, it becomes more fiscally sensible to keep all your assets in cash rather than invest in things, and that means the economy stops.

Why would they go bankrupt, their money is the exact same porportion, just a smaller number? If your stock was worth 10 dollars before, it would be worth a dollar(that in reality has the same value as the 10 did yesterday). Instead of the dollar getting stronger everyday, you prefer it getting weaker with inflation? So the money you do put away constantly shrinks in value.

SJMHO

 

[kyleb]

If tommorrow the government said the dollar was worth 10x what it was today...

I didn't suggest moving the decimal point, and that doesn't rightly change anything anyway.

I don't see how. Can you explain further?

I'm sure I can, but I'd need you to clarify your dispute with my argument before I'd know were to start.

As I see it the not rich can already undercut the wealthy easily, since they don't have near the overhead the rich do.

Well that sure explains how mom and pop operations keep running corporations out of town.

That is as long as the government doesn't put oppressive regulatory hurdles in front of them, to protect the all ready rich like government likes to do.

I do consider this a problem too.

I agree. But I don't see much difference between the government stealing from the poor to save the rich, and stealing from the rich to save the poor. It is still just theft, either way.

If you do it both ways, it balances out.

 

[Al68]

A fair society would be one that doesn't allow the rich to steal from the rest of us under the guise of being "too big to fail".

Now here's something I agree with. Except it would be more accurate to say the corporations "received stolen goods", since it was the government that stole from the rest of us for them.

 

[ideasrule]

That would give the not rich a better opportunity to offer other products which undercut those offered by the rich.

A fair society would be one that doesn't allow the rich to steal from the rest of us under the guise of being "too big to fail".

Define "stealing".

 

[Office_Shredder]

Why would they go bankrupt, their money is the exact same porportion, just a smaller number? If your stock was worth 10 dollars before, it would be worth a dollar(that in reality has the same value as the 10 did yesterday). Instead of the dollar getting stronger everyday, you prefer it getting weaker with inflation? So the money you do put away constantly shrinks in value.

SJMHO

That would be true if the government literally took 90% of everyone's money and burned it. If the value of everything was just cut by a factor of 10, imagine I spent 100 bucks on stock. That stock is now worth 10 bucks. But I could have just held onto my money, and still have 100 dollars!

To extend this to a more realistic scenario, I have two choices:

1) Invest my money. I invest in something worth $100. The value of my investment now begins to decrease naturally. In a year maybe that thing is worth $95 or so.. By investing my money I lose money

2) I hold onto my cash. I have $100 in the bank. After waiting a year, I can invest $95 in that same thing, and save myself 5 bucks. Alternatively, I would just never invest in anything because by definition of deflation, things tend to decrease in value

By not investing I make more money than I do by investing. With inflation, investments will naturally grow at the rate of inflation on average, which means that holding on to your cash isn't the better default position. With deflation, unless the thing I invest in grows faster than the rate of deflation, I lose money by investing in it

 

[russ_watters]

The majority of Americans struggle to pay their bills.

Please elaborate on that claim and cite a source.

This example is only in reference to overdraft fees, but lower income people are also continually hit with late fees, interest rate penalties, and they generally pay much higher interest rates for everything they buy on credit than do those who are better off financially. Often they must resort to check-cashing/payday-loan places in order to pay bills to avoid discontinued service or eviction and the charges at these places are insane.

Lower income people also buy more lottery tickets ( http://www.tucsoncitizen.com/daily/local/8477.php ). Are these self-destructive actionsn an effect or cause of their poverty?

Given the uneven distribution of wealth, I believe that the re-distribution of wealth through mechanisms such as progressive tax codes...

We have a progressive tax code.

...higher minimum wages, universal healthcare, tuition assistance, etc. (and the like) are not only warranted, but necessary for a better, more fair society in which everyone is better off, IMO.

But what do I know, I’m just a “bleeding-heart liberal”. Flame on…

Well, could you discuss what effects these policies are typically known to have on economic growth? I'll give you a hint: forced redistribution doesn't help economic growth...

 

[russ_watters]

That would give the not rich a better opportunity to offer other products which undercut those offered by the rich.

You're saying that "not rich" people could have enough money to start companies that are more efficient than the big companies? That makes no sense.

[separate post] Well that sure explains how mom and pop operations keep running corporations out of town.

Huh? Can you provide an example of that? One of the biggest complaints against big chain stores like WalMart and Home Depot is that they drive the mom-and-pop stores out of business via their larger inventories and lower prices.

A fair society would be one that doesn't allow the rich to steal from the rest of us under the guise of being "too big to fail".

That is a separate issue entirely and I agree that a capitalist society should do a better job of allowing failure...hey wait, maybe it isn't a different topic: you're saying you don't want to allow failure in people, just in companies. Isn't that a contradiction? More to the point: doesn't the same psychology you are railing against in companies exist in people too? That psychology is the essence of what drives people to succeed in capitalism and why purer forms of socialism have led to economic collapse.

 

[russ_watters]

Perhaps an advocate of redistribution of wealth could provide an opinion on exactly how far this redistribution should go...? How progressive should our tax system be? For example, should everyone below the poverty line pay no taxes? How about having the top half pay 90% of the taxes?

Otherwise, this is just a useless hand-waving exercise, as we already live in a system where wealth is redistributed via a progressive income tax and other methods.

 

[WhoWee]

Perhaps an advocate of redistribution of wealth could provide an opinion on exactly how far this redistribution should go...? How progressive should our tax system be? For example, should everyone below the poverty line pay no taxes? How about having the top half pay 90% of the taxes?

I'd like to expand the scope of this challenge.

The concept of private property and ownership seem to be left out of the debate. Who do the "redistributors" think owns the "big corporations"? The shareholders need to determine compensation levels of executives - not Government.

Anyone that owns a 401K should understand they are the "owners" of the "big corporations" the investment managers choose. The same is true of many insurance policies - look up the types/classifications of insurance companies.

Last, (unless you are a degenerate gambler) the incentive to take risk is profit. If you eliminate the potential for profit, there is no incentive to create jobs and invest capital.

The only reason to open a business is to earn sustained profits. Nobody (except politicians and charities) risks capital to create employment.

 

[russ_watters]

Last, (unless you are a degenerate gambler) the incentive to take risk is profit. If you eliminate the potential for profit, there is no incentive to create jobs and invest capital.

The only reason to open a business is to earn sustained profits. Nobody (except politicians and charities) risks capital to create employment.

People here like anecdotes so much, so I'll post a relevant one: My last job was working for a small engineering company. When I joined the company, it (meaning the sole proprietor owner) was just emerging from bankrupcy and I was employee #3 (working in his spare bedroom), down from around 20. Over the next 6 years, the company grew to 9, got a real office, and the boss made $250k-$300k a year which made him "rich" (the lower limit of the top 5% is $180k). But being unable to plan financially for a downturn and being in a particularly volatile industry when a downturn happens, now he's now back down to 2 employees and sub-letting that office space.

Point being? The personal risk a small business owner takes in starting a business is enormous. If the potential to make significantly more money as a small business owner than as an employee of another company didn't exist, people wouldn't do it.

 

[ray b]

Perhaps an advocate of redistribution of wealth could provide an opinion on exactly how far this redistribution should go...? How progressive should our tax system be? For example, should everyone below the poverty line pay no taxes? How about having the top half pay 90% of the taxes?

Otherwise, this is just a useless hand-waving exercise, as we already live in a system where wealth is redistributed via a progressive income tax and other methods.

any one working is paying a 15% SS tax plus any income tax
but a so called investor earning capital gains pays only a flat 15% total tax
and also gets a big break on dividends and can use tax credits and other write offs
few of those at the very top pay progressive tax rates as that is only for EARNED INCOME
quote W Buffet '' I pay less tax then my office help''

unEARNED income is where the real money is made and that tax is regressive not progressive

the BIG LIE the neo-conned love to tell is the rich are over taxed
BS only a few foolish rich really pay the top rates mostly sports movie or rock stars
who have big earned income that they can't hide
most biz CEO types get options far bigger then their base earned income
and use the many credits deductions and loop holes to avoid much of their taxes
and have the CORPs pay for the jets sky boxes travel costs limos ect that are untaxed to them and a write off to the CORP for double tax avoidance both to their personal taxes
and the CORPs taxes

 

[WhoWee]

any one working is paying a 15% SS tax plus any income tax
but a so called investor earning capital gains pays only a flat 15% total tax
and also gets a big break on dividends and can use tax credits and other write offs
few of those at the very top pay progressive tax rates as that is only for EARNED INCOME
quote W Buffet '' I pay less tax then my office help''

unEARNED income is where the real money is made and that tax is regressive not progressive

the BIG LIE the neo-conned love to tell is the rich are over taxed
BS only a few foolish rich really pay the top rates mostly sports movie or rock stars
who have big earned income that they can't hide
most biz CEO types get options far bigger then their base earned income
and use the many credits deductions and loop holes to avoid much of their taxes
and have the CORPs pay for the jets sky boxes travel costs limos ect that are untaxed to them and a write off to the CORP for double tax avoidance both to their personal taxes
and the CORPs taxes

Again, the shareholders (owners) of the corporation must believe these CEO's have EARNED their compensation packages. Otherwise, they would voice their disapproval or sell their shares.

As for the sky boxes, jet travel, hotels, limos, etc., how many people make their livings from these activities? Don't those companies employ people and also pay taxes?

Corporate earnings (cash flow in excess of expenses and debt service) are typically either re-invested, paid in dividends to shareholders, paid in bonus/incentives, retained in the form of cash reserves or liquid investments, or paid to the Government in the form of taxes.

As for Warren Buffet, do you have ANY idea as to how many companies he owns or the size of his annual payroll? The list is too long to post. Here is a good starting point to do your investigation.
http://www.google.com/search?q=berk...s=org.mozilla:en-US:official&client=firefox-a

 

[Office_Shredder]

As for Warren Buffet, do you have ANY idea as to how many companies he owns or the size of his annual payroll? The list is too long to post. Here is a good starting point to do your investigation.
http://www.google.com/search?q=berk...s=org.mozilla:en-US:official&client=firefox-a

That's the point Buffet was making. He makes oodles of cash but pays very little in taxes because of all the loopholes available to him

EDIT TO ADD:
Here's an article about it
http://www.timesonline.co.uk/tol/money/tax/article1996735.ece

 

[BoomBoom]

I support helping students and providing them more opportunities so that their skills are good and they are strong in global dynamic market.

As do I.

1) But, people who don't deserve wealth shouldn't get it.
2) People who deserve, should get it

I agree with this as well, but hard working people also deserve a living wage.

Universal health care is neither simple nor easy to have.

No it is not, but necessary nonetheless. It will not be long before healthcare costs result in lost jobs and reduced salaries...it's already to the point where getting a raise is a rarity for many.

Higher minimum wage wouldn't help much and it might raise the unemployment.

I bet anyone making at or close to minimum would disagree that it wouldn't help much.

 

[BoomBoom]

Do all people graduating in your class get the same grades? .

Of course not, but I believe that people that work hard and do their homework should at least get a C.

 

[kyleb]

You're saying that "not rich" people could have enough money to start companies that are more efficient than the big companies? That makes no sense.

It makes sense in the context of "If you raise the tax on the rich and companies, they will just raise their prices" which I was responding to, and you don't have such a broad definition of "rich" as to include with anyone the money or credit to start a company with.

Huh? Can you provide an example of that? One of the biggest complaints against big chain stores like WalMart and Home Depot is that they drive the mom-and-pop stores out of business via their larger inventories and lower prices.

I was making that exact point with sarcasm, in response to the claim "As I see it the not rich can already undercut the wealthy easily, since they don't have near the overhead the rich do."

That is a separate issue entirely and I agree that a capitalist society should do a better job of allowing failure...hey wait, maybe it isn't a different topic: you're saying you don't want to allow failure in people, just in companies. Isn't that a contradiction?

I'm saying "If you do it both ways, it balances out." In other words, I'd have preferred to not to do either, but I notice one being done more than the other, and hence am looking for balance though proposing the contrary.

More to the point: doesn't the same psychology you are railing against in companies exist in people too? That psychology is the essence of what drives people to succeed in capitalism and why purer forms of socialism have led to economic collapse.

I didn't intend to suggest anything psychological here, so I'm at a loss as to what you are referring to.

That's the point Buffet was making. He makes oodles of cash but pays very little in taxes because of all the loopholes available to him

EDIT TO ADD:
Here's an article about it
http://www.timesonline.co.uk/tol/money/tax/article1996735.ece

Exactly, I'm in this boat too, though not nearly to the extent Buffet is. Regardless, I don't see anything fair about working people being required to pay a higher percentage of their income in taxes than me, and am at a loss as to why so many working people defend it.

 

[BoomBoom]

Perhaps an advocate of redistribution of wealth could provide an opinion on exactly how far this redistribution should go...? How progressive should our tax system be? For example, should everyone below the poverty line pay no taxes? How about having the top half pay 90% of the taxes?

Otherwise, this is just a useless hand-waving exercise, as we already live in a system where wealth is redistributed via a progressive income tax and other methods.

I know that we already have this system in place, but I also know their are many here that don't believe we should.

The top rate at times has been much higher than it is now, but if you just want my personal opinion, 35-40% for the top bracket seems fair to me. And collecting taxes from those below the poverty line is somewhat of a meaningless gesture anyways, and seeing as how they are already being milked for all they've got from businesses, I think it would also be fair for them to be excluded from paying income tax.

 

[ideasrule]

Of course not, but I believe that people that work hard and do their homework should at least get a C.

How much do/did you talk to the people in your class? Many people study day and night, have almost no social life, and try every possible way to earn more marks but end up failing because they weren't smart enough. Hard work can only compensate for stupidity to a limited extent.

I don't want people who have no idea about basic physics concepts designing a bridge I have to drive over or a spacecraft exploring Mars. For people who aren't good at engineering--sorry, I know you've studied hard, but choose something else.

 

[kyleb]

Perhaps an advocate of redistribution of wealth could provide an opinion on exactly how far this redistribution should go...?

Ah, I forgot to respond to this question previously. I'd prefer a strictly flat tax rate with the only break being no taxation of individual income under the poverty line, just whatever anyone earns above it. Granted, that is a long term goal rather than anything I'd expect to happen with the snap of some fingers, but I do consider that the best path to adjusting the current distribution of wealth.

 

[WhoWee]

Of course not, but I believe that people that work hard and do their homework should at least get a C.

Obviously you agree that nobody deserves an "A" or 4.0 - those should be redistributed in such a way that everyone is provided a minimum "C" or 2.0 - right?

For instance grades of 4.0, 4.0, 3.8, 3.2, 2.0, and 1.9, 1.8, 1.7, and 1.8 should be more balanced.

In the example of the grades of 4.0, 4.0, 3.8, and 3.2 where they should all be forced to share with their under-achieving classmates - is .2 each fair, or should the 4.0's give more?

 

[bleedblue1234]

So many people fail to see the reason that rich continue to get richer is that it is a direct effect of government 'manipulation,' if you will, of the market place and the entire underlying price structure.

When government bailouts of wallstreet firms happen, there is an implicit guarantee put on them that they can take near unlimited risk because they are now 'backed' by the U.S. government. The reason so many wallstreet firms needed bailing out in the first place was precisely because of Fannie Mae's, Freddie Mac's, and the Federal Reserve's interventionist policies in the market. The only reason Lehman, Bear Sterns, Goldman Sachs, etc. needed government help was because of this perceived (and now realistic) 'government guarantee' of the entire mortgage system, for people felt no perceived need to measure the risk of these assetts or how their bets were set... the only goal for them was to leverage up like crazy... it was a heads i win tails the tax payer loses game.

Greed is continually cited as a cause of our current problems, but looking deeper it is no where near at the heart of it, it was a component that needed to be catalyzed by something; and that something was artificially low borrowing rates that allowed the greed to be exercised in the market place in such a way that would not be possible through private investment. No sane private buyer would ever place these bets these companies did, but this companies were able to do so precisely because they could get funding through the Fed and through other sovereign governments.

As to the issue of deflation/inflation, deflation and inflation both are scary scenarios. Right now a lot of people are seeing the effects of deflation: lowering home prices, consumer good prices, oil prices, etc. but what many of our representatives and economists also fail to see is how our current strategy sets up the next big wave of issues coming down the pipeline. We are getting the water flowing now, even if we won't feel the effects for many months/years to come. That is why I have a major problem with our current situation: we have no exit strategy. Ben Bernanke continually talks about this magic 'exit strategy', while assuring Americans that he will keep target growth rates high and interest rates low. But, unfortunately Ben, we can't have both. Once we see the effects of any real inflation, it will be far, far to late to deal with it. We must be proactive in our dealings with economics. This is not a true 'deflationary' period, rather a return to stable growth and output levels of the pre-housing/dot-com bubble era. It will be a tough road ahead, but I think we should look towards the future rather than the present; we must be proactive rather than retroactive.

As to the issue of wealth redistribution, I think the Soviet Union is a good case study of wealth redistributions effects, there were continual supply problems, people on the whole lived much poorer lives than comparative free countries, and in the end the system failed entirely. Pre-1930's U.S. capitalism is one of the finest examples of what true unbridled capitalism can produce: it is messy, but it also works. There is a happy medium between the monopolistic/corporate/conservative side of the spectrum and the liberal/government side of the issue. But, I believe history has shown that it is better to er on the side of freedom, for freedoms are so much easier to give up than to have returned. Once we start taxing the successful, we will face large issues of international competition and wealth fleeing this country. The reason the U.S. became one of the great havens for wealthy was because of its relatively low taxes on all incomes and its stable government/judicial system, but I fear with the recent events with the auto makers (the bondholders getting unlawfully taken out of the picture) and the current attack on the 'wealthy' (I quote wealthy because I see no logical way to define it, as to me it is completely subjective in nature). I think we have forgotten what has made the U.S. on the whole a great country; we need to learn from our past mistakes rather than continue to repeat them, at an ever greater cost.

John Cochrane, head of the University of Chicago's Econ Dpt., puts it like this: the free market is the best worst system we have. It is not pretty, but the alternatives are so much uglier.

 

[russ_watters]

any one working is paying a 15% SS tax plus any income tax...

This is factually wrong. There is a pretty high percentage of the population that pays no income tax: In 2005, it was just under 33%. http://www.ntu.org/main/page.php?PageID=155

And that doesn't include other people for whom the net balance between taxes paid and government cash subsidies received is zero or negative.

Generally, the SS tax is not included in such discussions as the SS tax is basically forced retirement savings. It is money you get back.

...but a so called investor earning capital gains pays only a flat 15% total tax
and also gets a big break on dividends and can use tax credits and other write offs

Could you please provide an argument rather than just spewing rhetoric? What is wrong with a 15% capital gains tax? Keep in mind that money spent to buy stock has typically already been taxed as income. And most capital gains are paid by ordinary people cashing in 401k's, not the Bill Gates' and Warren Buffets' of the world.

I agree that we should try a little harder to get taxes out of the guys who use capital gains as a high fraction of their income, but we should not penalize people for saving for retirement. A blanket raising of the capital gains tax does that.

...few of those at the very top pay progressive tax rates as that is only for EARNED INCOME
W Buffet '' I pay less tax then my office help''

Your claim, your responsibility to substantiate it: what fraction of people are in that situation where they receive much/most of their income via capital gains and thus pay a lower overall rate than, say, someone who makes $50K a year?

Note that I'm sure Warren Buffets secretaries probably make pretty good money and may even be young and unmarried - that segment of society (the affluent, young singles) are pretty heavily taxed.

unEARNED income is where the real money is made and that tax is regressive not progressive

It is difficult to consider a system regressive when the bottom third pays no income tax at all.

the BIG LIE the neo-conned love to tell is the rich are over taxed
BS only a few foolish rich really pay the top rates mostly sports movie or rock stars
who have big earned income that they can't hide
most biz CEO types get options far bigger then their base earned income
and use the many credits deductions and loop holes to avoid much of their taxes
and have the CORPs pay for the jets sky boxes travel costs limos ect that are untaxed to them and a write off to the CORP for double tax avoidance both to their personal taxes
and the CORPs taxes

Once again, lots of rhetoric, no facts. What fraction of the population are you talking about there? How many people actually make the majority of their income on stock options? I suspect it is far below 1% and personally, I'm not real concerned with the fact that a guy like Bill Gates or the Walton family is independently wealthy given the enormous contribution they have provided to the economy.

 

[russ_watters]

I bet anyone making at or close to minimum would disagree that it wouldn't help much.

And that is relevant how? Ask anyone if they would like more money and they will answer yes!

 

[russ_watters]

It makes sense in the context of "If you raise the tax on the rich and companies, they will just raise their prices" which I was responding to, and you don't have such a broad definition of "rich" as to include with anyone the money or credit to start a company with.

You need to define what you mean by "rich", then. Is it the top 1% of income earners? 5%? 20%?

I'm saying "If you do it both ways, it balances out." In other words, I'd have preferred to not to do either, but I notice one being done more than the other, and hence am looking for balance though proposing the contrary.

So the glass is half full/empty and you think empty is better than full, but you are going to fill it anyway? That makes no sense. If you believe that capitalism should let both fail and right now it only let's half fail, then the only logical course of action to support is making it so both are allowed to fail. Otherwise you are supporting a course of action that goes directly against your stated opinion!

Exactly, I'm in this boat too, though not nearly to the extent Buffet is. Regardless, I don't see anything fair about working people being required to pay a higher percentage of their income in taxes than me, and am at a loss as to why so many working people defend it.

It is pretty simple, kyleb - I, like most middle and upper middle class workers am going to be relying on investment income in order to retire. Investment income also played a critical role in enabling me to buy a house.

Perhaps the solution is to make the capital gains tax both progressive and situation dependent.

 

[russ_watters]

I know that we already have this system in place, but I also know their are many here that don't believe we should.

The top rate at times has been much higher than it is now, but if you just want my personal opinion, 35-40% for the top bracket seems fair to me.

At what income level would you place the top bracket?

And collecting taxes from those below the poverty line is somewhat of a meaningless gesture anyways, and seeing as how they are already being milked for all they've got from businesses, I think it would also be fair for them to be excluded from paying income tax.

Rhetoric about businesses milking them aside, as I've already pointed out, the bottom third of the population already doesn't pay any income tax.

 

[russ_watters]

Ah, I forgot to respond to this question previously. I'd prefer a strictly flat tax rate with the only break being no taxation of individual income under the poverty line, just whatever anyone earns above it.

Wow, kyleb. That's very surprising and I don't think it would fly with most liberals considering it means that that two thirds of the bottom third of the population that is currently not getting taxed would suddenly get hit with a 25% (give or take) income tax.

Overall, I'm pretty sure your idea would make the system much less progressive than it is now. I'm pretty sure tha the problem are trying to fix (the super-rich not paying as much taxes, percentagewise) is a smaller problem than you think.