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Economics question: How much is healthy for the 1%?

You have some objection to my answer. You want to laugh. I agree I am talking in terms of a physical economy...not casino winnings which should never be allowed to disrupt the real physical economy. My answer seems to make you nervous? I can see that. But your idea is to start with a static unfair distribution of wealth and continue in this manner which approaches the 99% having nothing at all, and when that end point is reached the value of the holdings of the 1% also approaches nothing and in a precipitous manner. Wealth addiction of the 1% is actually not any different from drug addiction in terms of patterns of human behavior. Aberrent accumulations of wealth and power cloys the judgement of these excessively rich people and we have the same patterns of denial that come from meth heads, less the pimples and rotting teeth. It is an addiction however that is licensed by our slavish adherrence to an economic theory that parallels the childhood game King of the mountain. These rich people begin to equate the existence of their personal wealth with morality and seem willing to do anything to maintain it, regardless of their actual personal needs, which actually could be well met with about 1% of the wealth. This is not rocket science, but you know in your heart, it is reality.

No, because the amount of capital needed between running Google and operating Tom's hardware store are not the same. By your reasoning they would be. Most of the great wealths are tied up in the ownership of their companies, not what they use.
 
Assuming we're talking about wealth distribution rather than income distribution, even if universal free education to the limits of ability is the norm, one assumes that there will still be a wealth disparity between people just entering the workforce and retirees.

So unless you are in favor of a universal standard government provided pension with no private savings or investment whatsoever, which is a bit daft, that means that there'll at least be a spectrum of wealth concentration with the very young having the least wealth and the oldest having the most, so the top 1% having 1% just isn't realistic. I don't think that a society where the top 20% owning 60% of the wealth would be all that bad. (ie. the oldest fifth of the population having more than half of the savings and investments.
 
One problem is, the extremely wealthy tend not to pay their share of taxes. Having the power and influence with policy makers, the super rich are able to manipulate the system for their own benefit.

Do you have proof of this? What data are you going off of?

There is a lot of crap in our tax code. Nothing like what it was before Reagan took a broom to it but it's still there.

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Taxing it away has the same effect.
No, it doesn't. Taxing it away shifts those resources elsewhere. Maybe to something more socially productive.

No profit = no investment.

Taxed away profit doesn't provide a reason to invest.

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What is the difference between "investment in the real economy" and "paper investments"? If you are referring to a stock purchase in the secondary market, are you accounting for the fact that for every buyer, there is a seller? That there are two sides to every trade involving "paper investments"? How does this fit with your claims?

He's got a halfway valid point.

What he's missing is that that profit is needed to provide the driving force. It is a drain on our economy but it's a necessary drain.
 
You have some objection to my answer. You want to laugh. I agree I am talking in terms of a physical economy...not casino winnings which should never be allowed to disrupt the real physical economy. My answer seems to make you nervous? I can see that. But your idea is to start with a static unfair distribution of wealth and continue in this manner which approaches the 99% having nothing at all, and when that end point is reached the value of the holdings of the 1% also approaches nothing and in a precipitous manner. Wealth addiction of the 1% is actually not any different from drug addiction in terms of patterns of human behavior. Aberrent accumulations of wealth and power cloys the judgement of these excessively rich people and we have the same patterns of denial that come from meth heads, less the pimples and rotting teeth. It is an addiction however that is licensed by our slavish adherrence to an economic theory that parallels the childhood game King of the mountain. These rich people begin to equate the existence of their personal wealth with morality and seem willing to do anything to maintain it, regardless of their actual personal needs, which actually could be well met with about 1% of the wealth. This is not rocket science, but you know in your heart, it is reality.

No, because the amount of capital needed between running Google and operating Tom's hardware store are not the same. By your reasoning they would be. Most of the great wealths are tied up in the ownership of their companies, not what they use.

You seem to think I don't understand that...of course I do. Both Google and Tom's hardware are performing necessary functions in our society. These functions can be performed without making either Tom or the Google CEO billionaires. Their positions in the world are the result of social agreements as to their necessity and importance to economic function. Perhaps Tom does not take too much for operating his hardware store, but the Google guy overreaches. I don't think all the billionaires got where they are by being crooked necessarily, but they do impede society when they restrict the flow of goods and services by self serving and almost fanatical entrapment of wealth they don't need and fear of financial insecurity.

Could you live without Google? Probably. There must be some restraint on its actions. The wealth of an organization differs from personal wealth anyway.
 
Do you have proof of this? What data are you going off of?

There is a lot of crap in our tax code. Nothing like what it was before Reagan took a broom to it but it's still there.

- - - Updated - - -

Taxing it away has the same effect.
No, it doesn't. Taxing it away shifts those resources elsewhere. Maybe to something more socially productive.

No profit = no investment.

Taxed away profit doesn't provide a reason to invest.

- - - Updated - - -

What is the difference between "investment in the real economy" and "paper investments"? If you are referring to a stock purchase in the secondary market, are you accounting for the fact that for every buyer, there is a seller? That there are two sides to every trade involving "paper investments"? How does this fit with your claims?

He's got a halfway valid point.

What he's missing is that that profit is needed to provide the driving force. It is a drain on our economy but it's a necessary drain.

It is the profit itself that needs to be distributed. It those who make profit do not reinvest in the physical economy at a sufficient rate based on speculation over the profitability of things like keeping our rivers clean we have dirty rivers...the same with our air...the same with our food...the same with contagion. Our economy needs to me social and environmental needs first for a healthy society. Just running amuck with strip mines, high rise buildings, war profiteering, and ignoring our social needs has created the tangle mess we have today...and all the bad feelings between the rich and the disadvantaged. And that is a formula for insecurity at the highest levels. That's what we have a society that is turned on itself..ala the kid's game...king of the mountain. All the people need to have some confidence in a future for themselves. A society that walls off a part of itself from participation gets like ours is today.
 
(picture of guillotine snipped for brevity -- LP)
This set France back decades.
Evidence: {} I'm noticing a pattern here...

Some counterevidence:  List of regions by past GDP (PPP) per capita -- France is consistently a bit behind western Europe's average, both before its revolution and after it. Also, the  Napoleonic Wars. France would have been unable to conquer much of Europe if it had been an economic basket case.

There is no magic number. ...

The findings show that the biggest issue is when the gap between the bottom 40% and the rest is especially large, and finds this as the reason: (great inequality means lack of education and skills development; picture snipped for brevity -- LP)
Sorry, but they rigged their health stats to support UHC.
Evidence: {} I fail to see why UHC is supposed to be such an intolerable evil. Loren Pechtel, according to what you are advocating, do you volunteer to be denied health-insurance coverage for the good of the economy?
 
It is the profit itself that needs to be distributed. It those who make profit do not reinvest in the physical economy at a sufficient rate based on speculation over the profitability of things like keeping our rivers clean we have dirty rivers...the same with our air...the same with our food...the same with contagion. Our economy needs to me social and environmental needs first for a healthy society. Just running amuck with strip mines, high rise buildings, war profiteering, and ignoring our social needs has created the tangle mess we have today...and all the bad feelings between the rich and the disadvantaged. And that is a formula for insecurity at the highest levels. That's what we have a society that is turned on itself..ala the kid's game...king of the mountain. All the people need to have some confidence in a future for themselves. A society that walls off a part of itself from participation gets like ours is today.

Distributing the profit is taking it away from the people who made the investments--and thus ensuring there won't be any more investments.

This is just yet another version of eat-the-rich. No matter what you cloak it in it will destroy the society.
 
It is the profit itself that needs to be distributed. ....
Distributing the profit is taking it away from the people who made the investments--and thus ensuring there won't be any more investments.

This is just yet another version of eat-the-rich. No matter what you cloak it in it will destroy the society.
Loren Pechtel, review the history of the  Great Compression. It was a collapse of civilization comparable to the fall of the Roman Empire, right?

Admittedly, it was soaking the rich rather that eating them. Though it might be interesting to find out what various right-wing financiers taste like.

I personally am not opposed to *all* concentration of wealth. But I am a firm believer in Noblesse Oblige, as opposed to yelling "Noblesse N'Oblige Jamais!!!" until one's voice gives out. I also have problems with the sorts of privileges that owners of great wealth often demand for themselves, like exemption from taxes combined with an absolute right to be bailed out and government spending being only for themselves and what they like. Comparing closing the carried-interest tax loophole to Hitler invading Poland -- talk about a sense of entitlement.
 
Several sources. I'll begin with Warren Buffett:

''It's not often you see someone stand up and say, "Tax me more!"

''Yet that's just what famed investor Warren Buffett has done in an op-ed in the New York Times headlined, "Stop Coddling the Super-Rich." Buffett says that very wealthy people like himself pay lower tax rates than the middle class, thanks to special tax categories for investment income. ''

As an example, Buffett said he paid an effective tax rate of 17.4 percent, while people who worked in his office made much less but paid higher effective tax rates of between 33 percent and 41 percent, averaging 36 percent.

"If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot," Buffett wrote. "To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot."


Key Facts

The richest 1% of Americans own 35% of the nation’s wealth. The bottom 80% own just 11% of the nation’s wealth.
In the 1950s and 1960s, when the economy was booming, the wealthiest Americans paid a top income tax rate of 91%. Today, the top rate is 43.4%.
The richest 1% pay an effective federal income tax rate of 24.7% in 2014; someone making an average of $75,000 is paying a 19.7% rate.
The average federal income tax rate of the richest 400 Americans was just 20 percent in 2009.
Taxing investment income at a much lower rate than salaries and wages are taxed loses $1.3 trillion over 10 years.
1,470 households reported income of more than $1 million in 2009 but paid zero federal income taxes on it.
CEOs of major corporations earn nearly 300 times more than an average worker.
30 percent of income inequality is due to unfair taxes and budget cuts to services and benefits.
The largest contributor to increasing income inequality has been changes in income from capital gains and dividends.

Talking points

It’s time for the wealthiest Americans and big corporations to pay their fair share of taxes. When they take unfair advantage of the many loopholes in the tax code the rest of us pick up the tab.
Instead of cutting education funding for our children, we should ask millionaires to pay a tax rate at least as high their secretary’s.
Instead of cutting Social Security and Medicare, we should ask the wealthy to give up a few tax loopholes so that we can make sure everyone has a secure retirement.

The first one is an anecdote. Hardly any kind of data or analysis. Surely you don't expect us to draw conclusions on anecdotes?

It is a comment made by someone in the super rich class who is stating his income and the rate of tax he pays. The figures that are given are not anecdotal. They can be checked. They are either right, or they are wrong.

As far as I can make out, the figures Buffett gives are correct.

The only data on the second one that seems to be of any relevance is the top 400 tax returns. However, this is only because it relates almost entirely to capital gains. The event that most often puts one into the top 400 is the one-time sale of a company that one started. This is hardly representative of this individual's tax rate over their lifetime. Is your only point that the top 400 don't pay their "fair share" - are these the only ones you define as "extremely wealthy"?

In regards to the 1,470 households with reported income of over $1,000,000 that paid zero federal taxes, that is cherry picked and most likely relates to special tax code deductions. It's less than 1% of the nearly 237,000 returns with incomes above $1 million, and thus hardly representative of millionaire households.

The problem remains that 1% of the worlds population has control of nearly half of the worlds wealth....and the rate is still growing, the individuals who fall into this class are getting more and more wealthy.

So what is to be done about it? Do you not see it as a problem? If you see it as a problem, and the sheer scale of the wealth is still accumulating in the hands of a few, how is this to be curbed and managed, if not through higher rate of taxes for individuals and firms who fall into this category?
 
Distributing the profit is taking it away from the people who made the investments--and thus ensuring there won't be any more investments.

This is just yet another version of eat-the-rich. No matter what you cloak it in it will destroy the society.
Loren Pechtel, review the history of the  Great Compression. It was a collapse of civilization comparable to the fall of the Roman Empire, right?

Such economic arguments assume we know what the rich were making. We don't.
 
The first one is an anecdote. Hardly any kind of data or analysis. Surely you don't expect us to draw conclusions on anecdotes?

It is a comment made by someone in the super rich class who is stating his income and the rate of tax he pays. The figures that are given are not anecdotal. They can be checked. They are either right, or they are wrong.

As far as I can make out, the figures Buffett gives are correct.

The only data on the second one that seems to be of any relevance is the top 400 tax returns. However, this is only because it relates almost entirely to capital gains. The event that most often puts one into the top 400 is the one-time sale of a company that one started. This is hardly representative of this individual's tax rate over their lifetime. Is your only point that the top 400 don't pay their "fair share" - are these the only ones you define as "extremely wealthy"?

In regards to the 1,470 households with reported income of over $1,000,000 that paid zero federal taxes, that is cherry picked and most likely relates to special tax code deductions. It's less than 1% of the nearly 237,000 returns with incomes above $1 million, and thus hardly representative of millionaire households.

The problem remains that 1% of the worlds population has control of nearly half of the worlds wealth....and the rate is still growing, the individuals who fall into this class are getting more and more wealthy.

So what is to be done about it? Do you not see it as a problem? If you see it as a problem, and the sheer scale of the wealth is still accumulating in the hands of a few, how is this to be curbed and managed, if not through higher rate of taxes for individuals and firms who fall into this category?

Here is the current situation _before_ the 59% increase in capital gains taxes (which took effect in 2013). How much higher would it need to be on the top 1% for you to consider it "fair"?

49440-Land-Figure1.png


49440-Land-Figure2.png


CBOtable2.jpg


https://www.cbo.gov/publication/49440

As far as wealth ownership goes, what I care about is _how_ the wealth was obtained. If it was obtained via entreprenurship, adding new valuable goods and services or lower cost goods and services to the world, then I don't have a problem with it, as we all benefit. The wealth they own is only a portion of the new value added to the world. The total value added is divided up between those responsible for the creation, operation, and financial investment in the company (small number, which is why that value gets concentrated) and the customers who use the products and services (very large group and dispersed). If it is obtained via no-bid government contracts, stifling of competition with government regulation, or loopholes that make no economic sense, then that needs to be corrected.
 
Loren Pechtel, review the history of the  Great Compression. It was a collapse of civilization comparable to the fall of the Roman Empire, right?
Such economic arguments assume we know what the rich were making. We don't.
Loren Pechtel, maybe you could do some research and fill in the gaps. You could beat Thomas Piketty at his economic-statistics game, and maybe even win a Nobel Memorial Prize in Economics for your efforts. So how about that?
 
Such economic arguments assume we know what the rich were making. We don't.
Loren Pechtel, maybe you could do some research and fill in the gaps. You could beat Thomas Piketty at his economic-statistics game, and maybe even win a Nobel Memorial Prize in Economics for your efforts. So how about that?

I don't have a flux capacitor, a DeLorean or a Mr. Fusion.

The data isn't around now to study.
 
As far as wealth ownership goes, what I care about is _how_ the wealth was obtained. If it was obtained via entreprenurship, adding new valuable goods and services or lower cost goods and services to the world, then I don't have a problem with it, as we all benefit. The wealth they own is only a portion of the new value added to the world. The total value added is divided up between those responsible for the creation, operation, and financial investment in the company (small number, which is why that value gets concentrated) and the customers who use the products and services (very large group and dispersed). If it is obtained via no-bid government contracts, stifling of competition with government regulation, or loopholes that make no economic sense, then that needs to be corrected.


But there is a problem with gross inequality between the income and wealth of a small percentage of the world's population and the rest of us.

Other posters and I have already pointed out the problems, both in social and economic terms over the course of several threads.

''A new study finding an "unfair," rich-poor balance in state and local taxes has been getting big traction on the Web this week.

The study, from the Institute on Taxation and Economic Policy, found that "virtually every state's tax system is fundamentally unfair, taking a much greater share of income from low- and middle-income families than from wealthy families." It added that state and local tax systems are "indirectly contributing to growing income inequality by taxing low- and middle-income households at significantly higher rates than wealthy taxpayers."

In other words, it said the tax systems are "upside down," with the poor paying more and the rich paying less. Overall, the poorest 20 percent of Americans paid an average of 10.9 percent of their income in state and local taxes and the middle 20 percent of Americans paid 9.4 percent. The top 1 percent, meanwhile, pay only 5.4 percent of their income to state and local taxes''


The world's 100 richest people earned a stunning total of $240 billion in 2012 – enough money to end extreme poverty worldwide four times over, Oxfam has revealed, adding that the global economic crisis is further enriching the super-rich.

“The richest 1 percent has increased its income by 60 percent in the last 20 years with the financial crisis accelerating rather than slowing the process,” while the income of the top 0.01 percent has seen even greater growth, a new Oxfam report said.

For example, the luxury goods market has seen double-digit growth every year since the crisis hit, the report stated. And while the world's 100 richest people earned $240 billion last year, people in "extreme poverty" lived on less than $1.25 a day.

Oxfam is a leading international philanthropy organization. Its new report, ‘The Cost of Inequality: How Wealth and Income Extremes Hurt us All,’ argues that the extreme concentration of wealth actually hinders the world’s ability to reduce poverty.''

The problem is clearly real.

My question is: what can be done to bring more equality and fairness into the system?

Increasing taxes further yet for the super rich class may be one way. Or placing a ceiling on incomes....
 
Loren Pechtel, review the history of the  Great Compression. It was a collapse of civilization comparable to the fall of the Roman Empire, right?

Such economic arguments assume we know what the rich were making. We don't.

Loren: Your agument assumes you are one of the rich. It also assumes that for the good people to succeed, some people just have to be sacrificed. You are unwilling to give anything up for the sake of society. You are also unwilling to even consider helping our society. You are the true me generation personified. Regarding arabs in general you have a racist attitude and you presume to know they are savages that only want to destroy Jews. You always assume a superior knowing attitude that condescends to others and frankly has totally alienated me.
 
Loren Pechtel, maybe you could do some research and fill in the gaps. You could beat Thomas Piketty at his economic-statistics game, and maybe even win a Nobel Memorial Prize in Economics for your efforts. So how about that?

I don't have a flux capacitor, a DeLorean or a Mr. Fusion.

The data isn't around now to study.
What an excuse for laziness. Especially compared to research like AEAweb: JEP (20,1) p. 133 - The Economy of the Early Roman Empire
 
The study, from the Institute on Taxation and Economic Policy, found that "virtually every state's tax system is fundamentally unfair, taking a much greater share of income from low- and middle-income families than from wealthy families." It added that state and local tax systems are "indirectly contributing to growing income inequality by taxing low- and middle-income households at significantly higher rates than wealthy taxpayers."

Yup, every state I've lived in it's certainly been that way. The total rates are low but they're certainly regressive.
 
Such economic arguments assume we know what the rich were making. We don't.

Loren: Your agument assumes you are one of the rich. It also assumes that for the good people to succeed, some people just have to be sacrificed. You are unwilling to give anything up for the sake of society. You are also unwilling to even consider helping our society. You are the true me generation personified. Regarding arabs in general you have a racist attitude and you presume to know they are savages that only want to destroy Jews. You always assume a superior knowing attitude that condescends to others and frankly has totally alienated me.

Your "rebuttal" makes no sense at all.

I'm saying we have no idea what the rich really made because of all the loopholes in the tax code back then. That says nothing about my economic status, it says nothing about how I feel people should be treated.

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I don't have a flux capacitor, a DeLorean or a Mr. Fusion.

The data isn't around now to study.
What an excuse for laziness. Especially compared to research like AEAweb: JEP (20,1) p. 133 - The Economy of the Early Roman Empire

Nobody was trying to hide things back then.
 
The study, from the Institute on Taxation and Economic Policy, found that "virtually every state's tax system is fundamentally unfair, taking a much greater share of income from low- and middle-income families than from wealthy families." It added that state and local tax systems are "indirectly contributing to growing income inequality by taxing low- and middle-income households at significantly higher rates than wealthy taxpayers."

Yup, every state I've lived in it's certainly been that way. The total rates are low but they're certainly regressive.

What would you suggest as a remedy for the excessive gap between the extremely wealthy and ordinary wage earners?
 
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