Thanks for the catch! And, I have no idea whatsoever what a rubric's cube would be or would do. But…
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Much as I like the idea of a rubric's cube, it's spelled Rubik's cube. (Now what would a rubric's cube…
Great response to the Mace bill by AOC (video at link).
@bcb: Sometimes I think the whole election was an elaborate murder-suicide plot that the entire country is carrying out.
@Megalodon: They've made it clear that their first target is trans Americans. They'll get to that mass deportation stuff when…
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This is the picture of class inequity.
Do you have the percentages of wealth distribution (what % is the top 1%, next 19%, and everyone else)?
Well, according to the census (pdf link), the limit of the 95th percentile (i.e., only 5% of households make more than this) for household income in 2009 was $180,001. That document doesn’t have the 99th percentile (1%), but it’s still pretty impressive, really.
Similarly, the proportion of total income that went to the highest quintile (top 20%) was 50 — half. Jives pretty well with the pie chart provided above, really. Again, it doesn’t break out the 99th percentile.
Puts in perspective the people bitching about tax increases on individuals making more than $250K, for sure …
There’s a lot more detailed data in tables at that pdf, but I don’t know enough to talk knowledgably about them.
Now do a chart showing the percentage of wealth created by percentile.
Some more info on incomes, with more details on the top 1%. And another source listing the number of people in each income bracket (going up to $0 million + /year). Fun fact: did you know the top 1% receive government transfer payments at roughly the same rate as the poorest quintile? The top 1% gets 1.2% of transfer payments, while the poorest quintile gets 25.8 % of transfer payments which is a 1:1.3 ratio. RonF’s upper middle class (top quintile minus the top 5%) do the worst on government transfers, with a ratio of 1:0.67.
The top 1% starts at $373k. The top 400 earners average $ 170 million a year. There are roughly half a million people making more than a million dollars a year. Playing around very roughly with some numbers, a 50% tax on income above $1 million would raise $50 billion/year (and since most of that income is capital gains, it would raise about $35 billion/ year in new revenue) from the richest 400 people. Personally, I’d favor a 90% tax on income over $1 million /year (although I’d allow people to spread one time gains over an extended period of time, to cut down on winging like The Beatles “Taxman”), so that would raise $75 billion/ year in new revenue from the grotesquely rich (plus at least another $80 billion in new revenue from the 15,000 people making $10 million or more, and another $130 billion in new revenue from the 125,000 people making more than $2 million/year). That’s at least $300 billion in new revenue. Of course, it is the tax on the more numerous rich people that would raise most of the revenue, rather than the taxes on the grotesquely wealthy, but the taxes on the grotesquely wealthy would have other benefits for society. The merely rich (1 million people making more than $0.5 million/year), if taxed at 66% on income over $500,000 would provide (very roughly) $400 billion/year in new revenue. The actual amount would be higher, since much of that income is (a) capital gains, so 66% would represent an increase of 50%, not 33% and (b) the income is not evenly distributed as 2.5 million people with $1 million each in income, it is highly skewed. A 3 % rise in tax rates above $250,000 (repeal of the Bush tax cuts on rich people) is estimated to bring in $70 billion a year, so a 33% rise would bring in more like $700 billion, minus a bunch if we restricted it to greater than $500,000, plus a bunch for applying it to capital gains.
So, very roughly, we could probably raise somewhere between 0.5 to 1 trillion/year in new revenue by raising taxes on rich people to high but not unreasonable levels. That would greatly reduce the deficit in our current economic crisis (not that we should be out of deficit during a recession), and would provide for a substantial increase in non-medicaid/medicare/SS social welfare programs during non-recessionary times. However, it wouldn’t pay for the projected increase in medicare costs over the next two decades. That requires changing the rate of growth of medical costs to be more in line with the rest of the first world.
I doubt you’d see any meaningful loss in happiness for anyone if we instituted my tax policies for rich people. I don’t think there is any credible evidence that people taking home $1 million/year are any happier than people taking home $500k/year. Presumably, you’d need to institute at least some of it gradually to decrease the shock aspect, which probably would decrease happiness for the moderately rich.
I’m one of the ~500,000 averaging more than a million a year. I agree with everything Charles S wrote. And I left California a few years ago, but it was to move to Europe.
I can’t understand wealthy people who don’t think a healthy working society is something worth spending their money on. Let’s see, I could spend another $25K/year on a new car, or, on living in a society where reasonable health care is available to everyone. Hard decision? Only if there’s something wrong with you.
Robert,
How do you want to define “wealth created”. Are we to define it by who does the work? Because that would accrue to those nearer the bottom than those at the top. Should we define it by who invents new financial instruments that merely suck wealth away from the larger society without actually creating anything. I’m amazed that the last couple of years of misery hasn’t shamed people away from acting as if wealth creation is in itself a good divorced from the larger implications of the graph above. Creating imaginary wealth through fraud is very lucrative for those in the blue area but has been disasterous for those providing the goods and services which are the basis of real actual wealth.
So we really need to know how you wish to define wealth creation because depending on whether you mean actual wealth creation or financial trickery we are going to come up with massively different graphs.
Viewing the link, the top 20% pay ~69% of the taxes and earn ~55% of the income (in the other graph). As you say, if they are able to, come to the point where they have >90% of the wealth, they can certainly afford more taxes. It is much easier to save a million dollars when you earn 300k vs 30k.
I don’t even disagree that the rich should pay more. A 90% tax on income over X (perhaps adjusted for locale, like NYC, and of course adjusted for inflation like all taxes should be) seems reasonable. Especially if we can agree that X is some ridiculously large number.
At what point, however, is the system progressive enough? It will always be easier to live on more money, and thus building wealth is easier for the high earners. Someone with a $10 million estate could live off of 200k/year and you’d hardly touch their money. Which is good, but does not fix your wealth issue.
Nor should it really, there should be a top and a way to get to it. Someday I’d like to be there myself.
Remembering that the wealthy tend to have the most influence and thus would fight taxes successfully, I might:
-Drop the mortgage interest deduction. This is costly and primarily benefits the rich. http://www.taxfoundation.org/news/show/1341.html
-phase out deductions at the 35% tax bracket
-add a 40% bracket at $600-700k, 45% at 1 million or so (increase for inflation over time). More than that and you may create excess tax avoidance behavior.
-Up capital gains to “your tax bracket” at the 35% bracket
-tie social security more closely to average lifespan again
“Similarly, the proportion of total income that went to the highest quintile (top 20%) was 50 — half. Jives pretty well with the pie chart provided above, really. Again, it doesn’t break out the 99th percentile.”
If the top quintile makes 50%, the chart above does not reflect that, because the top 1% and next 19% are the top quintile.
If you’d like the CBO (Congressional Budget Office) breakdown of taxes paid vs. income share, it’s at the following link. http://www.cbo.gov/publications/collections/taxdistribution.cfm
As you can see, the top tier makes a shitload of money, but they pay an even shitloadier amount of the taxes.
Of course, things like sales and property taxes disproportionately impact the poor, and of course as someone above pointed out, it’s way easier to save money when you make a shitpot of money vs. shit money.
Wealth creation is always a shared endeavor, no matter how you try and define it. Anyone who says they earned it all by themselves is totally deluded, period.
For a look at wealth distribution, take a look at pg 12 of this paper: http://www.people.hbs.edu/mnorton/norton%20ariely%20in%20press.pdf
The top 20% own 84% of the wealth, the bottom 40% own .3% between them, and the so-called middle class/working class own about 15%.
As for wealth created by percentile, who makes the cars or digs the mines or logs the trees? Who then creates the wealth? The capitalist/investor? Or the laborer? I think both have a stake in the game and both should be rewarded. But understanding the tension between labor and capital is important. Neither can win or we all lose.
I’m not at all sure they do pay all that much, relative to what they make. Consider a guy making 10k and one making 100k. Tax (or give) each 10% of their annual income and see what difference it makes to their lives. Take someone making a million, and impose the 90% rates of Ike’s day and they still come out ahead of a lot of us.
This country is an expensive operation to run but those at the top, whether they earned or inherited it, have more to lose if it goes belly up and obviously wouldn’t have it all if they lived almost anywhere else.
The linked paper above references the Veil of Ignorance, a useful thought experiment. If you can design an income distribution model so that no matter where you fell on the map, you would have a reasonably good standard of living, what would it look like? For most people surveyed, it looked a lot like Sweden. The people at the top kept a lot of their income but as income levels decline, the percentage of what you kept went up. I don’t think any country that makes Volvos or Bang + Olufsen stereo equipment is a dystopian nightmare. While no place, no system, is perfect, that’s no excuse for standing still.
@nick:
Look at the pie chart again. The slice for the top 1% and the next 19% together cover 50% of the chart.
Therefore, what was about the top quintile is entirely correct.
KKRice,
You are misreading the chart. The thinnest wedge is the bottom 80%. The top 1% own almost half the wealth, the next 19% own half the wealth, and the rest of us own the little smidgen in yellow. Income is divided a little more evenly than wealth, with ~50% of income going to the top 20%.
Re: the Veil of Ignorance, I don’t care what the income distribution looks like. I care about the opportunities available across the society.
How would a higher tax rate on the rich decrease opportunities across the society? Why would a more equitable distribution of wealth and income decrease opportunities across the society? What are you counting as opportunity anyway?
If you are thinking of the ability to change class, why do you think the US has less of it than most Western European countries (which manage more class mobility with higher taxes and more equitable wealth distributions)? Why do you think the US has decreased in class mobility in the past 30 years at the same time its taxes on rich people have dropped and its wealth distribution has become less equitable?
How would a higher tax rate on the rich decrease opportunities across the society? Why would a more equitable distribution of wealth and income decrease opportunities across the society?
I don’t know that they would.
What are you counting as opportunity anyway?
The ability to improve one’s starting circumstance with the application of hard work, intelligence, or luck.
If you are thinking of the ability to change class, why do you think the US has less of it than most Western European countries (which manage more class mobility with higher taxes and more equitable wealth distributions)?
I don’t know that we have less ability. We have less of it observed; that’s not the same thing. Maybe Americans are trying less hard than Europeans. Maybe some Americans in lower quintiles are broadly satisfied with their quality of life and don’t feel like making tradeoffs for economic improvement. Maybe the European mobility is coming as a result of social policies aimed at same. (Which wouldn’t constitute opportunity as I define it above.)
Why do you think the US has decreased in class mobility in the past 30 years at the same time its taxes on rich people have dropped and its wealth distribution has become less equitable?
Honestly? I think Americans don’t work the way they used to work. At the same time, I think America’s economic advantages, largely a result of post-WWII structural devastation to the world’s advanced economies, and the opening up to world markets of the world’s peasant economies, started ending at around that time with the slow rise of globalism and the long-term post-war recovery and development of those same economies. In 1950 if you worked your butt off you could make enormous returns in an enormous environment of opportunity, without significant competition from an enervated and blasted Europe or a peasant Asia. That stopped being true after a couple of decades.
People would rather work their 40 hours and play Call of Duty and hang out with their kids. That’s OK. But it isn’t a formula for moving up in the quintiles, either.
I don’t care how things shake out. I care whether people can get a fair shake. If Ghetto George and Barrio Barry and Suburban Sue work hard and that improves their circumstances, I’m satisfied. If they come up with some genius idea and make a bajillion dollars, I’m satisfied. It’s not cool if Suburban Sue’s work ethic yields her a higher return FOR EQUAL INPUTS than Ghetto George’s, and it’s not cool vice-versa.
I suspect that a large part of our economic inequality stems from the fact that, unlike in the 1950s and 1960s and 1970s when just doing a good job and working would seriously juice your pay, because of the aforementioned structural imbalance in the world economy, these days big wealth is created by innovation and invention. Some of the people in that top 0.1% are folks who got their money via picking the right the vaginal canal to emerge from, but more are people who invented something, or found a more efficient way of doing something. I don’t have a problem with that. That’s how I make MY money, though I’m a long way from the top 0.1%, or even the top 1%.
All I care about is that people are free to make their own choices, and that making smart/high-character choices produces better outcomes than dumb/low-character choices.
Honestly? I think Americans don’t work the way they used to work.
Really? Why don’t you think Americans work they way they used to? Certainly we don’t work as hard or as long as we did in the company towns and the mills and factories of the 1890s. But you might not want to point to those days as exemplars of Americans pulling themselves up with hard work.
In 1950 if you worked your butt off you could make enormous returns in an enormous environment of opportunity, without significant competition from an enervated and blasted Europe or a peasant Asia. That stopped being true after a couple of decades.
Well, the man of the 50s also benefitted from the rising standard of living achieved not only through the actions of a vibrant union but also through massive post-war government social spending especially on things like education and housing. It was this spending on education that helped transform America from goods-producing blue-collar workers to white-collar service workers thus creating the modern American middle class.
And I’ll bet if you go back and look at wealth inequality during this time you would find that it was much lower than it is now.
People would rather work their 40 hours and play Call of Duty and hang out with their kids. That’s OK. But it isn’t a formula for moving up in the quintiles, either.
Well, what exactly is your formula for moving up in the quintiles? It can’t be just working harder or more hours. If that was the way to move up then my parents should be pretty damn rich. My parents both worked two jobs while running a farm. They worked from before dawn to long after the sun had set. And they did this six days a week. And they never once played Call of Duty.
I don’t care how things shake out.
Which is why you are a bit turned around on this issue. How things shake out is exactly why it is hard to move up the quintiles. And the higher you are in the quintiles the more power you have to influence the world around you thus making it easier to accumulate more and more wealth leaving the majority of us behind.
I care whether people can get a fair shake. If Ghetto George and Barrio Barry and Suburban Sue work hard and that improves their circumstances, I’m satisfied.
Do you really think that those at the bottom can really ever get a fair shake?
If they come up with some genius idea and make a bajillion dollars, I’m satisfied. It’s not cool if Suburban Sue’s work ethic yields her a higher return FOR EQUAL INPUTS than Ghetto George’s, and it’s not cool vice-versa.
I agree, but the reality of the situation–that is how things shake out–is that those paid the least put much more effort into the system than those paid the most. Coal miners don’t get paid to take business lunches or golf junkets. Just saying.
I suspect that a large part of our economic inequality stems from the fact that, unlike in the 1950s and 1960s and 1970s when just doing a good job and working would seriously juice your pay, because of the aforementioned structural imbalance in the world economy,
Ehem, actually it was due to a modern middle class standard of living created by post-war gov’t spending and strong unions. Manufacturing actually gave way to service work in the post war years.
Then in the 70s American companies started a pattern of deindustrialization (that continues to this day–just since 2001, the US lost about 42,400 factories) that made hard work and effort irrelevent. After all, it’s impossible to work hard when your job has disappeared.
these days big wealth is created by innovation and invention.
And a heck of a lot of financial trickery and fraud as shown by the last decade.
All I care about is that people are free to make their own choices, and that making smart/high-character choices produces better outcomes than dumb/low-character choices.
I would love that too. If only it were the way things shake out. But it’s not. Low-character choices trump high-character choices almost every time. That’s why every couple of years we are reminded that the American economy is based on imaginary wealth.