Forum Post: It's not about individual rich people but about income distribution
Posted 12 years ago on Oct. 21, 2011, 8:20 p.m. EST by NielsH
(212)
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There is too much talk about individual rich people, which takes the discussion away from the problems arising from too skewed an income distribution.
Over the last thirty years nearly all economic growth has gone to a small segment of society. This is not only unfair (the small segment is not solely responsible for the economic growth), it is also bad for the economy.
Too much concentration of wealth creates a tightly coupled system, which eventually becomes too big to fail.
Too much concentration of wealth also leads to an exorbitant growth of the financial sector, which doesn't add to productivity. I am not saying we don't need a financial sector, but due to concentration of wealth, it is bigger than is good for the economy.
Finally, too much concentration of wealth reduces demand. It is almost impossible not to spend $20,000/year, but it is hard to spend $1 billion/year. Putting money into a rising gold-price may help investors to park their money safely for a while, but it slows down the economy.
Forget about deserving rich vs. undeserving rich, that's just a red herring. The problem is NOT individual rich people, but an income distribution that hinders economic growth, making us all poorer.
It will in fact even catch up on those 1%. If the economy stagnates further they will lose money too. So it's in their own self-interest to return to a reasonable income distribution.
97% of all workers make a below average income
If income was allocated equally, everyone would be paid $127,000 per year, enough to make everyone in society wealthy.
If we paid everyone who did mentally or physically difficult work twice the amount as everyone else, they would get paid $230,000 per year and every other worker would get paid $115,000 per year.
Bottom line: We have enough resources and technology to make everyone wealthy. There should be no poverty and no middle class.
http://occupywallst.org/forum/the-only-solution-to-the-inequality-of-power-and-i/
http://occupywallst.org/forum/are-you-rebels-or-revolutionaries-choose-revolutio/
You assume that work ethic, creativity, and ingenuity would continue to exist and produce at their current levels if you removed their just rewards.
The vascular surgeon making $400,000 per year and the pizza delivery guy making $26,000 per year DO NOT perform equally valuable tasks for society. Do you honestly believe someone would invest the time and resources necessary to secure a medical education, or an engineering degree, or an IT certification, when a 30-hr per week menial labor job would pay the same amount under your proposed plan?
Read "Harrison Bergeron" by Kurt Vonnegut.
http://www.tnellen.com/cybereng/harrison.html
This parable is the next logical step in your plan, in which everyone is forced to be equal by restricting not only results, but by handicapping physical and mental abilities. As long as abilities, motivation, and attitude differ from person to person, their results will differ also.
Having a more rational allocation of income does not lead to society physically harming others to make them equal. That is ridiculous.
But doing nothing about inequality leads to 97% of all workers making a below average income.
It leads to half of all workers making 75% less than the average income.
It leads to 1 in every 5 kids living in poverty
It leads to 25% of all blacks living in poverty
It leads to 52 million without health insurance
The $230k is MORE than what the average surgeon makes. But what I propose is an example. Some jobs can be paid more than $230k.
I do not think you should pay for your education. Education is work. And you should get paid to work. Education is not a consumption item.
This can only work if people are paid to go to school.
Lowering income inequality so society works well for everyone does not lead to making people handicap. That is incredibly idiotic.
It's not about absolutes. Nowhere in the world does a pizza delivery guy make as much as a vascular surgeon, but there are places (and quite a few among the rest of the rich world), where income equality is lower.
Would it stifle the motivation of a vascular surgeon if (s)he made $385,000 per year?
Income inequality in the US has become extreme and it hurts the economy.
Not enough to quit her job. But maybe enough to see 10-15 fewer patients per year. Or restrict her pro-bono work at a community clinic. Or hire one fewer receptionist or assistant for her practice.
The question should be, is it reasonable to assume her motivation would remain the same as we chip away at her reward?
The Mayo Clinic, one of the best hospitals in the world, pays all doctors a flat salary. Not paying for individual performance is part of their philosophy.
"Or hire one fewer receptionist or assistant for her practice."
Interestingly enough, (s)he may also hire a receptionist or assistant more, because the salaries paid are tax-deductible.
When the top tax-rate was 90% in the 1950's, most people hated to pay taxes just as much as they do nowadays, and lots of business owners rather invested their money back into their business.
The effective tax rate in the 1950's was higher than today, but only by a few percentage points, while the tax-rate in the upper bracket was more than twice as high.
Keeping money in the business is generally good for employment and for growth of the economy.
I actually think it would be reasonable to assume that motivation would remain the same when high-earning incomes are taxed a few percentage points more. People don't only do work for the money. Everybody likes to get paid well, but when basic needs are met, work needs other motivators as well. No one becomes vascular surgeon only because it makes $400,000/year. There are other motivators and satisfiers to such a job.
The $400,000 cases are actually a corner case. Massive income inequality rests among those who make much more than that.
Money exchanged that does not result in goods and services should not be counted when accessing an economy
I can understand this. I have no trouble with my uncle K- making a hefty amount of money since he earned every nickel honestly, working very hard for it over thirty years. What he did not need he gave to charity (particularly at Xmas) and he's never once skipped out on his taxes. I doubt he would complain if Uncle Sam tells him to pay more as he has more than enough to retire with and otherwise he is not into disobeying the law or bending the rules for his own gain.
I mind much more when it is some millionaire who has not paid any real taxes in years, who made that money at the expense of someone's pension, and who makes Ebenezer Scrooge look like Desmond Tutu. I mind a lot more when his idiot son drops out of high school but then is brought in as a "consultant" at the office and makes an obscene amount of money for very little work, or when someone like me has to do it for him...and don't get paid much.
I don't have a problem with the wages people make if someone has put 10yrs into their education/training then they do deserve to be paid well. If you drop out and work fast food then you're the fool.
My problem is with the swindling the banks and bankers do while they themselves are given a bonus for doing so. CEO's are given a bonus even if they fail. Its just out of order, needs to stop.
I agree, I don't think there ever was a problem with the income a doctor makes or any other well paid professional.
The fact that nearly all benefits of increased productivity has gone to the to 1% cannot be explained by increased earnings of well paid professionals, it is almost entirely due to the financialization of the American economy.
The financial industry has moved from being a contributing factor to economic growth to a private tax burden on all economic activity, hence the slowing down of the economy.
Inflation is what keeps poor people poor and rich people rich. End The Federal Reserve and end inflation.
There was inflation during the "Golden Years" (1950-1970) and there was a growing middle class. Inflation is not the cause of the current economic down turn and the influence of the 1% on the political system.
That's because there was enough production to mask the negative affects of inflation. Now that our country lacks the production we once had, inflation is being exposed for the monster that it truly is. Inflation is far and away one of the biggest causes of the current economic down turn.
Those who talk about the redistribution of wealth are often idol worshipers who wish to control what they do not. Many are contesting oppression with the idea of turning oppressors into the oppressed.... this is a sick notion!
I would like to suggest the following video, which shows what gets worse when rich and poor are too far apart:
http://www.ted.com/talks/richard_wilkinson.html
Im not disputing the fact that issues arise from a gap in wealth. What Im disputing is typical methodology.
Typical methodology is raise the tax rate of the upper bracket, which in part leads to higher revenues (which is a good thing given the deficit) and in part leads business owners to leave more money in their business to avoid paying taxes.
Higher tax rates for the upper bracket also reduces the incentive to take on too much risk. Much of the economic collapse in 2008 can be subscribed to reckless finance practices inflated by the bonus structures. If very high income is taxed more heavily that incentive will drop a bit too.
I'd rather see a solid financial sector where outstanding performers are rewarded handsomely, than a financial sector that goes from boom to bust, making vulgar amounts of money while wrecking the economy.
Actually I think we need a hight tariff on imported goods too... something like 90%
If yuou tax the rich they bank offshore. The 2008 crisis was a government issue. The root of the issue was 1) the fed held interest rates artificially low (to add incentive to borrowing and 2) the Gov secured the loans (adding incentive to loan). Im all for a progressive cooperate tax and a national flat sales tax.... the other taxes can go.
The income tax rate of the upper bracket has been at a higher level for the last 50 years of the 20th century. Those that want to offshore their capital will do that no matter the tax rate, as long as there is a tenth of a percent difference.
The 2008 crisis was just as much a government issue as a finance industry issue. The finance industry has lobbied (and bribed) officials for decades to get favorable legislation (deregulation). Once deregulation was in place the financial industry was not capable to sustain itself because of reckless practices. It's not the government's job to run a bank, so the failure of the banks was very much their own fault.
Flat sales taxes are very regressive. Those making enormous amounts of money consume far less (in relative terms) than those who make minimum wage. If you eliminate capital gains tax (which is already low), the income gap between the 1% and the 99% will only grow larger.
I dont think thats the case income tax use to be significantly higher. However, there were plenty of loop holes and deductions, so no one paid.
Im for deregulation that benefits the people and companies, yes it exist :) I agree, we should not have bailed them out. The death of a company is massive market stimulus!
The rich enjoy there money when they spend it, lets tax them there.
it should be about crony capitalism.
Fascism is the problem. It's everywhere in the US
A new statistic out today shows that 50% of Americans earn less than $26,000 per year.
I saw that. The median income is ~$26,000 but the average income is ~$39,000. That's the largest income disparity this country has seen in an extremely long time.
http://sociology.ucsc.edu/whorulesamerica/power/wealth.html look at Figure 5 wealthy have always had about the same % since the 1920 at least by this graph hmmmmmmm
Greentara, I find that guy's site kind of confusing and don't see the graph. I do see a chart that shows the history of wealth but from that I don't see that the top 1% have always had about the same %. It decreases in the middle decades of the 20th century. Which graph are you looking at?
Figure 5 (its right after Table 3...yeah confusing) shows the % of wealth actually peaking in late 1970's but remember wealth and income are different things
Don't be mistaken; a few percentage points can mean a difference between a well-functioning economy and a dysfunctional one.
so this graph says wealth held by top 1% has gone down since the late 1970's now INCOME by top 1% as multiple of bottom is much greater but some assets do NOT create income, but create wealth (think about your house, it costs maybe 2% to own, 1 in tax, 1 in maintainence)
When polled, US citizen's believe that the most talented and hard-working should get ahead - within reason. On average, whether rich or poor or Republican or Democratic, they feel that it would be fair for the wealthiest 20% to hold about 32% of the nation's wealth. The wealthiest 20% now holds 85% of the nation's wealth. The top 1% hold 40%. The entire BOTTOM HALF hold only 1% of the nation's wealth. Our current system of taxes, taken as a whole, has long favored the wealthy over the middle class, using the tax system to divert money from the middle class to the already-wealthy.
http://fairsharetaxes.org
Oh, and by the way, money enables them to buy hordes of politicians and regulators, so they can continue to rip off the 99% (e.g. Borrow from the Fed at less that 1% and charge, 7, 9 , 15, or 25% ), And they can listen to every phone call, every email and text message, to decide how to get you, and they can decide to make any amount of dirty air, dirty water, dirty food, dirty medicine, dirty mortgages, dirty derivatives, dirty lobbyists, dirty courts, and dirty filabuster.
Yes, the problem is with "individual" rich people. They make the individual decisions that cause all of this to happen. Concentration of wealth is a nice impersonal term. But these decisions are not impersonal. They are ugly decisions that are just as dirty as the actions of the person who opens the sludge valve into a river.
Sorry a person is responsible for each and every irresponsible act and they (or you) are accountable for them. Get used to it.
And you can't fight each and every one of them individually. We need the right enforcement of regulation to take on all of it.
You are correct and I have long championed the correct shade, gauge and material of red tape. It is what has saved the lives, and quality of life, for untold millions of our citizens. It is the nail that the 1% wants to leave out so they can grind the 99% under their heels, with counterfeit and shoddy goods, services and even governance. No, reasonable regulation will make it's contribution without quality enforcement.
People who don't believe in government hire people like themselves to regulate and enforce and when they do their inevitable best to do the job poorly, they blame the regulations and call them red tape (see The Bush administration). I call them subversives, not patriots.
The biggest reason for wealth inequity is our regressive tax system. That's right, add taxes together at all levels of government and our entire system is very regressive...
Add together all the taxes we pay (fed,state,local,corp) and you'll find billionaire Warren Buffet pays only 11% total taxes on $8 billion investment gains. Yet, a minimum-wage worker pays 37% total taxes on a $14,500 annual wages. No joke, see the math at: http://fairsharetaxes.org Unfair. Destroying our economy. Threatening our democracy. The website also proposes a really fair, simple, economy-fixing, nation-saving alternative, that would save each working-poor and middle-class household thousands, fund important programs for the future, and slash the deficit. Pass this along to friends who might be interested.
Those numbers are false.
The worker making $14,500 would pay 10% or 15% in income tax, depending on his marital status, assuming no deductions, credits, or allowances beyond the standard deduction... a HIGHLY improbably situation.
Warren Buffet's capital gains taxes are 15% for long-term gains and 35% for short-term gains. Capital gains are the taxes applied to his income from investments.
I assume the 37% is coming from medicare, soc security, sales tax, property tax... all taxes that Warren Buffet also pays.
Please read more carefully. You are falling into the wealth-advocates trap of considering federal income taxes only and not considering unrealized capital gains, which are not reported as income or taxed. Federal income taxes account for only 30% of the taxes we pay. If you want an honest evaluation of taxes you have to consider payroll, sales, and property taxes which are regressive and shift the tax burden to the working poor and middle class.
The website does all that and clearly supplies the numbers in a spreadsheet. The site has had tens of thousands of views and correspondents, many of them certified accountants, and none have challenged the numbers. Please take a careful look at the the post and http://fairsharetaxes.org You'll see you made a mistake.
Also, I might add that people from Japan, China, and other foreign countries should not be tax exempt when they start a business here nor should they get $2700 a month to live here from the government
No one is rich because of their own labor. All concentration of wealth in any economic system arises because of transfer of wealth from those who actually create the value. Any rich person whether it be Jobs, Gates, Buffet or others, accumulated their wealth by taking small amounts from others. Employment is that process which makes the transfer of wealth from a working person to a 'boss' possible. In any other context, the taking of property from one individual and keeping would be recognized for the illegal act that it truly is. Until that process ceases, the trickle up economy will continue and there will be rich and poor: poor created because the value they caused to exist was taken from them. It happens in Capitalism and Communism. Only a system where that flow is stopped will survive. All other systems will succumb to revolution in the long run. The rich will never say "There, I have enough". They will continue to accumulate until some other force stops them. It is simply human nature. Our only hope is to devise a system where the flow from poor towards rich is barred from the economy. It isn't such a stretch. We outlaw stealing and slavery already. There just happens to be a form of unlawful taking that continues to be allowed. Take that away and we have some hope of living without the fear of eventual revolution awaiting us.
good post !... a limit on wealth would fix the issue and change the whole dynamics of society...The question is what to set it at... 5, 10, 20, 50 or 100 million? Just imagine a world where the only incentive for doing things was Not profit... take away the profit motive and end the reign of billionaires
I don't think wealth should be capped at all. There is no problem at all with some people being very rich. Even a relatively equal society as Sweden's has billionaires in the top 20 of Fortune's 400.
A top tax rate around 50% would come a long way.
are you in the 1%?
Yes I am.
The bottom 1% to be precisely. I just started my own business and trying to make ends meet.
ok my friend, well i agree with you there are swedish billionaires. But they are more passive rewarded by the globalisation of capitalism ( owner of IKEA, Tetrapack etc.) They dont get involved in political and social-economic agendas (morgans, rothechilds, buffets, murdochs, gates). Wall street controls the US and pays for their agenda. There is no real democracy.. and its pretty clear now the income inequality is the root of many, if not most of societal problems.. watch this ted talk: http://www.youtube.com/watch?v=cZ7LzE3u7Bw
I have seen that talk, even linked to it in some comment.
OWC Manifesto and/or list of issues/demands should include the following:
(1) First must-read: “The Price of Civilization: Reawakening American Virtue and Prosperity” Written by Dr. Jeffrey D. Sachs
http://www.npr.org/2011/10/18/141421746/income-disparity-and-the-price-of-civilization
http://www.amazon.com/Price-Civilization-Reawakening-Prosperity-ebook/dp/B004KPM1FS
(2) Second must-read: “Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens”
http://www.amazon.com/Treasure-Islands-Uncovering-Offshore-Banking/dp/0230105017
http://treasureislands.org/
http://www.democracynow.org/2011/4/15/offshore_banking_and_tax_havens_have
http://www.ethicalmarkets.com/2011/03/24/treasure-islands-uncovering-the-damage-of-offshore-banking-and-tax-havens/
Wealth imbalances divert money from the real economy and redeploy it in the “financial” economy, which at this stage in the cycle more resembles a rigged casino than an efficient conduit of capital. The last time the financial industry share of GDP spiked was 1929. The reason it has not crashed yet is unparalleled government intervention, which has not fixed the problems, but only delayed the day of reckoning and increased the magnitude of that inevitability if nothing changes.
A more equitable and sustainable economy is necessary to break the cycle of history. To accomplish this requires three simple things: Federal revenue must go up, Federal outlays must come down and there must be simple but real financial reform. It is not a choice between one and the others. Federal revenue increases should come exclusively from income streams that have enjoyed preferred treatment for a long time, but everyone will have to expect less from the government for expenses to be reduced. It will not be enough to merely balance the budget; we must begin paying down the cumulative debt to remain a dominant economic power. China’s “currency manipulation” is simply a matter of them buying our debt because we create it. For the last ten years the “financial sector” has prospered while the rest of America got saddled with more debt both public and personal. “Cutting taxes” and borrowing the shortfall isn’t really cutting taxes, because the actual tax due increases with the addition of interest, and the burden shifts to people who can’t vote because they are children or haven’t even been born yet. This generational theft is unconscionable. We hear a lot about the right to life of the unborn, but what about their right to liberty? The real price of the financial bailout is that we sold an unborn generation into indentured servitude when the government assumed or guaranteed private debt for which it had no previous obligation, while no attempt was made to “claw back” any money from the perpetrators or to prosecute them for systemic fraud. Instead, they kept their ill-gotten gains, their jobs and their freedom. They also claim they broke no law so the rest of us must have missed the news the day fraud was de-criminalized.
Somehow I got into a debate of explaining this in semi economic terms...
http://occupywallst.org/forum/glass-steagall-act-1-question/#comment-170374
In a nutshell, true long run economic equilibrium, meaning how things should be in a healthy economy, would mean wages go up, prices go up, and profits go down, leading to a much more equitable share, and more money changing hands, which you could call "growth."
Things are so flawed now it's a matter of time before it all falls apart, in a worse way.
Every time some filthy rich pig gets even richer it concentrates the wealth even further. I've had it with every single one of them. I've had it with their incredible greed. No more excuses.
STOP CONCENTRATING SO MUCH GOD DAMN WEALTH!
The problem is a political system that allows them too.
That's the chicken. The egg it hatched from was the incredible greed of the rich.
Greed is a universal problem, existing throughout time and space. That's why we have laws an that's why laws shouldn't be a commodity.
Blaming greed is not going to help, just like blaming lust doesn't help those who want to see lower teen pregnancy rates.
What we are facing is not the result of only a universal problem, such as greed, but an institutionalization of it. That's what needs to be fought. Fighting individual rich people is a waste of time.
It grows and spreads like wildfire with every multi-million dollar paycheck, every lottery jackpot, every $200,000,000 concert tour, every $10,000,000 endorsement deal, ect.
It spreads like wildfire. Now, it's a worldwide epidemic.
Money isn't all it sounds like.
Agreed, and I particularly like the statement -- "the problem is NOT individual rich people, but an income distribution that hinders economic growth, making us all poorer", so so perhaps you would consider our group's proposal of an alternative online direct democracy of business and government at http://getsatisfaction.com/americanselect/topics/on_strategically_weighted_policies_organizational_operating_structures_tactical_investment_procedures-448eo and then direct questions or comments to our group's 19 members committed to that plan at: http://finance.groups.yahoo.com/group/StrategicInternationalSystems/
Rich capitalist corporations suck! When the economy turns around I'm gonna go work for a poor person.
how's he going to pay you?
My point!
haha. hard to detect sarcasm online. wouldn't you agree though that crony-capitalist corporations suck just like leaches do because they are a parasite on this country, in that they buy the politicians and tell them they want their competition eliminated. So they 're not free-market capitalists at all. Then they jack up the price to where we can't afford to live.
I agree but OWS will never change that they have the wrong agenda and targets.
maybe but there's a lot of different people here and we could make adjustments
You "could" but you won't.
I don't know the worse the economy gets the more discontented the people will become and the economy will get much worse.
And more OWS'ers will beat on a drum....and what will have changed?
OWSers need to do like the tea party and get involved in the system to change the system. What did the tea party do in 2010? sent like 60 politicians home.
I know but it's hard to do anything when no one knows what the hell is going on. OWS will b cut in half once the first week long stretch of 20 degree weather kicks in up there.
I don't know what's going on either. But with this number of people there's potential to change the status quo, if we can focus on some agenda and not fracture over social issues.