TCS Daily


Two Americas, Indeed

By Peter Cuthbertson - February 26, 2007 12:00 AM

With Democrats in control of both Houses of Congress for the first time in twelve years, economic inequality is back on the agenda.

In his response to the State of the Union address, new Virginia Senator James Webb began by contrasting how much those at the top of the average company earned with the amount earned by those at the bottom. Running for the Democratic Presidential nomination, John Edwards is returning to his 2004 theme of "two Americas." They are joined by liberal pundits such as Paul Krugman and Jonathan Chait, who between them accuse conservatives of "hatred" and of desperate efforts to confuse the issue.

But while liberals may appear united and ready on all fronts to fight a traditional class war, in the dozen years since they last controlled Congress much progress has been made in the study of what factors produce wealth in America. This progress is mostly thanks to the academic Dr. Thomas Stanley. In surveys of thousands of millionaires, aimed at identifying the choices and behavior that lead to prodigious wealth, Dr. Stanley identified again and again the same characteristics, catalogued in numerous books. Unfortunately for class warriors, they are poor fodder for an agenda based on envy.

The picture of an actual millionaire is dramatically less glamorous than commonly-held visions of exclusive neighborhoods, expensive clothes and colorful social lives. In his 1996 book The Millionaire Next Door, co-authored with Dr. William Danko, Dr. Stanley revealed that the typical millionaire spent less than $400 on their most expensive suit, and only about 1% spent more than $2,800. Only one in ten millionaires had ever spent more than $300 on a pair of shoes. Most millionaires pay a few hundred dollars or less for their watch, and $30,000 or less for their main motor vehicle. They have been married to the same person most of their adult lives.

The wealthy are conspicuous for their lack of consumption: "What are three words that profile the affluent? FRUGAL FRUGAL FRUGAL". The book is full of startling individual cases: the millionaire who refused the gift of a Rolls Royce because he couldn't imagine driving up in one to eat at the crummy restaurants he prefers, or throw caught fish in the back seat; the wife who, after her husband gave her $8 million in stocks, returned at once to clipping the 25 cent grocery coupons from her newspaper.

This is no coincidence. It is not that most millionaires are in the habit of being frugal despite their wealth: it is that they are so wealthy because they are in the habit of living so frugally. The plentiful residual income goes into savings and investments that are left to grow for decades.

It is not inheritance that explains American millionaires: most inherited nothing and fewer than one fifth inherited even 10% of their wealth.

Nor, crucially, does high income mean high net wealth, unless it is combined with a choice to live below one's means. Unfortunately, this is difficult in some high-income professions: "doctors, lawyers, accountants, and so on are expected to live in expensive homes ... wear expensive clothes, drive luxury automobiles." Many of them do - their high incomes can support this high level of consumption, and explains the market for watches and suits costing thousands of dollars. But these buyers become wealthy much less frequently than those who live below their means.

This surprising picture of America's wealthy presents class warriors with two problems. First, un-American as it might be to scapegoat and overtax the rich when they are perceived as Porsche-driving and Rolex-wearing, one can nonetheless imagine the envy that might inspire. But what is the future of class hatred in an America where, in fact, Porsche drivers and Rolex wearers have little net wealth, and the real rich are those who eat at the same restaurants and drive the same cars as most people, even when they can afford not to? It is difficult to imagine even the most skilled demagogue persuading Americans to resent the man who drives the same American-made car for years or the woman who faithfully cuts out every grocery coupon.

Second, devising economic policies that would target the wealthy would be still more difficult. Higher income taxes might reduce income inequality, but it would be a sideshow to the reality that inequalities of wealth are a result of some living below their means, not unequal incomes. Higher capital gains taxes, which can only be levied on realized gains, would have also have little effect on most millionaires, who are passive, buy-and-hold investors who see their stocks appreciate but rarely sell.

If liberals are determined to reduce economic inequality, they would have to take lessons from Dr. Stanley and encourage generally a culture of delayed gratification and a certain amount of self-denial - a self-reliant America of stockholders and coupon-clippers who marry and stay married. This is the profile of America's wealthy, and a serious effort to reduce inequality would mean getting more Americans to adopt this lifestyle. But of course, for many who see inequality as a curse, this cure would be worse than the disease.


Categories:

195 Comments

Self command and valuation
If enough Americans could muster the self command necessary to defer gratification and accumulate wealth, then they could also overcome or at least suppress their envy. This would deprive class warriors like Edwards and Obama of their audience, in turn depreciating the value of class war as an investment in political capital to a net negative sum. Finally, that blessed day would arrive when envy would no longer define America's fiscal and social policy.

But that day will never arrive. Why? Materialism.

A materialist is a person who undervalues intangible wealth like happiness while overvaluing tangible wealth. Worse, the materialist believes that acquiring tangible wealth is the only way to acquire intangible wealth. More simply put, money buys happiness, and if you ain't got it, you can't be happy.

This is why the materialist who does strike it rich drapes himself with the evidences of happiness, only to discover he's no happier than he was before. In contrast, it seems the millionaires profiled here are happy despite their money, and better yet, the source of their happiness is self command, just as most wise men have always taught.

Capital goes where it's treated best, which is why capital usually ends up in the estates of those who don't overvalue it while fleeing class warriors, who value capital for its capacity to buy them power and happiness.

Money may not make you happy ...
.... but it sure takes the sting out of being poor, Robert!

"Capital goes where it's treated best, which is why capital usually ends up in the estates of those who don't overvalue it while fleeing class warriors, who value capital for its capacity to buy them power and happiness."

Are you really saying that only (some) of the rich have the capacity to use wealth wisely? And that it'd be wiser to not enable workers to acquire wealth since they would only spend it in a vulgar manner? Perhaps they should be happy with their lot and have a few sessions of therapy to 'defer' their aspirations.

One of the positive features of this site is that it's one of the few places where the philosophy of low expectations (environmentalism, sustainable development, anti-development theories) is given a merciless dressing down so it's surprising that someone should be advocating a greater 'self-command' to 'defer gratification'. It has echoes of sustainable development and the racist assumptions of 'culturally appropriate technologies' for the Third World. Sorry Robert but this vulgar prole will continue to try and squeeze as much out of his boss so I can keep my head above water.

Self command is vulgar?
You've got an odd conception of self command, cassius. Do you really believe the cultures of the Chinese, the Indians, the Jews and the Greeks, together with all the cultures theirs have influenced, labor under tyranny of low expectations generated by the vulgar prole of wise men and prophets? Why do you suppose they were so influential? And what do you have to offer them in exchange for their self command but kiddie-porn, grotesque bling and top-to-toe plastic surgery? Moreover, isn't it racist to assume that they ought to prefer the vulgarities of modern lifestyles over the wisdom of their forebears? (Hint: Yes, your multiculti assumptions really are racist, cassius.)

Besides, capital does go where it's treated best: That's why people who didn't start out rich end up that way. Moreover, if you read the article the first time, you'd discover that the rags-to-riches crowd invest their money in long-term positions instead of consuming it on Jaguars and Rolexes, which means they really have let someone wiser than them spend their money in return for a security evidencing the value of their initial investment together with a future claim on the investee. Or do you understand nothing of finance?

So continue to squeeze the vulgar prole who is your boss, cassius, and he'll continue to deny you if he's wise, which, by the way, is why he'll end up rich while you remain frustrated, envious and ensnared in foolishness.

unequal pay
All those liberals who lament that some people make so much more than others can just be ignored because they are hypocrits anyway. Does anyone think that Paul Krugman, or any congressman, or indeed any of the liberals on this forum would really be willing to have the same pay as the the cleaning lady, or the trash collector? Of course not, they're just envious that others make EVEN more than they do. Once I suggested to one of the liberals on this forum that he made an average wage, and he returned my comment with shocked dismay and scorn, and implied that he made much more than any old ordinary working class guy.

Read my comments again, Robert
My comment : "this vulgar prole [me] will continue to try and squeeze as much out of his boss so I can keep my head above water."
I honestly think you're misread my comment. I was sarcastically referring to myself as a vulgar materialist. Where did I refer to my boss as vulgar?

Robert: "And what do you have to offer them in exchange for their self command but kiddie-porn, grotesque bling and top-to-toe plastic surgery?"
Sorry but where have I offered these things? I think you're going off at a tangent, Robert.

Robert: "Moreover, isn't it racist to assume that they ought to prefer the vulgarities of modern lifestyles over the wisdom of their forebears? (Hint: Yes, your multiculti assumptions really are racist, cassius.)"
Erm again, rb! Where have I said 'they' (whoever you mean by that) prefer (or should prefer) the vulgar lifestyles over the wisdom of their forebears? The icing on the cake is your accusation that I'm a multiculturalist! Where on earth do you derive that from? My CRITICISM of sustainable development and only advocating the Third World to use technologies 'appropriate' to their culture is the antithesis of multiculturalism. The poor in developing countries CAN break out of their poverty by harnessing technology that was used to develop industrialised countries. It is the 'sustainable develpoment' crowd that provides an excuse for lack of development i.e. 'they wouldn't be able to handle rapid growth rates'. So point out where my criticism is racist, Rb. I'm intrigued.

"So continue to squeeze the vulgar prole who is your boss, cassius".
See my comment at the top. As for the rest of that comment, I'm sure you'd quite like workers to just keep quiet and accept whatever their benevolent boss wants to pay them but most people are too busy trying to pay the mortgage, rent, kids clothes, education etc to bother waiting for a decent wage to be given from on high. As my dad used to say, "If you go cap in hand, you'll get a kick in the teeth" i.e. if you wait around for an 'inflation-busting' pay rise you'll be waiting a long time.

Perhaps
your comment is directed at me, Dietmar, but I've no problem with the rich getting richer. My only concern is that I and my family become richer.

Spreading the wealth in a redistributive fashion isn't what I'm driving at in my argument. As far as I'm concerned, the rich can attempt to accumulate as much wealth as they want. I'll be doing the same. Evening out incomes by more progressive taxation (and the assumptions behind it) won't necessarily improve the lot of an average worker. It leads to the lowering of people's horizons i.e. rather than fighting for a better wage they may become apathetic and reliant on their employers benevolence for an improvement in their living standards.

Therefore, I'm all for the rich improving their lot - I'll be right behind them! Just don't expect the rest of us to tip our cap and not fight for an improvement in our own material (and, maybe, spiritual) well-being. What's good for the goose is good for the gander.

Work, Investment and Wealth
“If enough Americans could muster the self command necessary to defer gratification and accumulate wealth, then they could also overcome or at least suppress their envy.”

Franklin Roosevelt believed that Social Security would, at the appropriate time, evolve into a real pension program…that is, a savings and investment program. A program where the average worker could achieve financial independence (as opposed to state servitude) by safely accumulating contributions and investment earnings over a 40 to 50 year working career. Unfortunately, most politicians since Mr. Roosevelt appear oblivious to power of long term investment and apparently detached from the financial hardship our un-optimized Social Security program is inflicting on most Americans.

I believe that if Social Security could be transformed into Savings and Investment vehicle controlled by consumers, that in time America would become a more investment oriented and wealthy society. Federal policies are in part to blame for excessive materialism in America. But as long as Americans elect reps who pander to fear and insecurity, it is very unlikely that optimal federal economic policies will be enacted.

Those who start with little and accumulate significant wealth today do so in a system that is stacked against them. These Americans should be commended and their practices studied and adapted by others. In an environment where federal government policies encourage investment and productivity, these successful Americans have shown the way for all to earn their way to wealth.

did you even bother to read robert's post before jumping to conclusions?
Nowhere did he propose limiting anyone's ability to earn money. He just pointed out that those who know how to invest wisely will acquire more funds, while those who fail to invest will stay poor.

Isn't that the point of the article?
You said: "See my comment at the top. As for the rest of that comment, I'm sure you'd quite like workers to just keep quiet and accept whatever their benevolent boss wants to pay them but most people are too busy trying to pay the mortgage, rent, kids clothes, education etc to bother waiting for a decent wage to be given from on high. As my dad used to say, "If you go cap in hand, you'll get a kick in the teeth" i.e. if you wait around for an 'inflation-busting' pay rise you'll be waiting a long time."

Isn't the point that you should save enough money to invest? Did you miss the word "frugal"? You don't have to buy the most house that you can "afford", you don't have to buy the most expensive clothes, you don't need the nicest car. If you develop and follow good money management skills then you can accumulate wealth. You might not have as much as some but through the miracle of compound interest you can accumulate a fairly big pile even on a very modest salary. But, it's not fun or glamorous, it's just good old-fashioned hard and steady work.

I should also point out that you're missing the biggest capital asset one has - one's self. Remember as Robert said "Capital goes where it's treated best..." it's not just money that he's talking about. If your boss doesn't appreciate you then find another job. Or, get more skills and show your boss that you're more capable and you're being underutilized. Take on more challenges, don't accept the status quo.

And remember, if you think success and happiness depend on other people then you'll never be successful or happy. It's up to you, if you're not happy or successful then change what you're doing because what you're doing isn't working. Take ownership of your life and your future, make things happen instead of letting things happen.

The redistribution of wealth
Perhaps no single thing points up the distinction between the two Americas more than the way anyone speaking up for a greater share in America's riches on the part of its labor force (say, Paul Krugman) is accused of wanting to "redistribute income". This quite purposely brings to mind an image of jealous proles plotting in back rooms to bring the undeserving rich to a bad end... and plays on the same fears that have always been bandied about in this country when labor rears its head.

When in fact there could be no more naked a play to gain an unequal share in those riches than the plan, recently having succeeded, to put through a system of differential taxation... whereby those earning their income from dividends and capital gains pay to sustain this country at a lesser rate than those who earn their pay by performing actual work.

Why is it that the lords don't have to pay as much as the lowly yeomen? Are they exalted in some way that's lacking in those who agree to do "an honest day's work for an honest day's pay", as was my father's perpetual hope?

It is apparent that the beneficiaries of our pay-to-play society are not open to considering any moral argument to spread our wealth more equally among those who have actually created it. Such is considered to be an unsound business decision, leading to lessened profits. So I would think it incumbent on our work force to organize, as capital has done, the better to collectively bargain with heir masters in the halls of Congress.

If the playing field is not level the best strategy would not be to complain loudly, but to devise a strong jack to put under it.

mhoward
"It's up to you, if you're not happy or successful then change what you're doing because what you're doing isn't working. Take ownership of your life and your future, make things happen instead of letting things happen."

That was precisely my point - asserting one's interests to improve one's lot.

As for the first part of the comment, having the ability to be frugal is a luxury lots of folks can't afford. Wanting to spend what little spare cash they have on essentials is often the order of the day. Hence our 'vulgarity'. ;-)

mhoward
"It's up to you, if you're not happy or successful then change what you're doing because what you're doing isn't working. Take ownership of your life and your future, make things happen instead of letting things happen."

That was precisely my point - asserting one's interests to improve one's lot.

As for the first part of the comment, having the ability to be frugal is a luxury lots of folks can't afford. Wanting to spend what little spare cash they have on essentials is often the order of the day. Hence our 'vulgarity'. ;-)

Yes the federal reserve's policy on inflation and SS...
Yes the federal reserve's policy on inflation and SS conspire to prevent the unsophisticated poor from accumulating wealth. The federal reserve's policy of continuous but low inflation price inflation has undermined the type of investment that the unsophisticated make that is saving accounts and whole life insurance (in the 1970’s people’s whole life insurance were whipped out) to the point where most no longer bothered. SS not and investment scheme at all has over time removed the urgency and culture of saving. Also slow growth policies and exercise regulation of building and subdividing of land have made it more difficult non-saver low income people to invest in their own housing.



Double taxation?
Roy,

Aren't Dividends already taxed twice. A corporation pays income taxes on any profits earned, and then, out of those profits, a dividend payment is made, which is then taxed again.

In fact, the double taxation element of dividends kept companies from giving dividends in the first place. Instead, it created a bad incentive to reinvest all profits, keeping money out of the hands of the shareholders. Shareholders that include retirment plans, 401K holders, and many other pooled funds held by the middle and lower class.

Then capital gains taxes. Right now, there is a high rate for short-sellers. But most homeowners would be hurt by increasing capital gains taxes on long-term holdings, and homes are the biggest capital investment for the poor and middle-class.

Of course, you could add an exemption on capital gains taxes for homes, but then you'd add another complication to an already complicated tax system. And each complication winds up being another tax loophole that only the rich can afford to fully exploit.

Your cry for a more moral economic system leads only to pain and suffering. And the best way for workers to ensure they are getting "an honest day's pay" is to keep searching for a job that will pay it and to vote with their feet if they can't find jobs in their area.

That big leap from here to there.....
Please explain how raising the capital gains tax to previous levels will lead to spreading "our wealth more equally to those who have actually created it."? Will this require a distribution of the monies collected from the additional taxes to others, who for whatever reason, do not benefit from capital gains? And what is it that has been created and by whom?

Capital gains home-sale tax break a boon for owners
Home owners already get a big capital gains tax break. The rules changed in 1997. If you're not familiar with the changes this article may provide some insight:

http://www.bankrate.com/brm/news/real-estate/20041018a1.asp

FYI - it was a very big change. Do yourself a favor and read the article.

diction belies bias
"whereby those earning their income from dividends and capital gains pay to sustain this country at a lesser rate than those who earn their pay by performing actual work."

you heard it here first, investing doesn't count as 'actual' work. obviously if it isn't really work then those who derive earnings from it, most of the population and a staggering majority of the middle class, don't really deserve to keep all of it.

we could rightly point out that free flowing investment with no taxation on gains what-so-ever would automatically result in higher wages but it would do little to avail against such loaded language.

"any moral argument to spread our wealth more equally among those who have actually created it."

and there we have it, at its base this is not an argument about what is best but what is 'right' and what is 'wrong.' clearly those that do not agree with our moral code of stealing to the rich to give to the poor should be coerced into submission.

prove it
you made an objective statement:

"having the ability to be frugal is a luxury lots of folks can't afford."

now prove it. establish a subsistance level of living for an individual and show that a significant number are living at or below that level. hint: the current poverty line is well above the subsistance level.

unequal opportunity
Most people refered to as liberals here in the United States would not qualify as liberals in other places.

Most of us do not want everyone to earn the same wage, we want people to rewarded for being good at what they do and to stretch themselves and "be all they can be." What defines us as liberal here I believe is a desire to insure that everyone has an equal opportunity to improve thier lot, and that people are treated with dignity even if they choose to be trash collectors or cleaning ladies.

This is in sharp contrast with liberals who want everyone to earn exactly the same wage.

Crowds of idiots
Cassius:

"Are you really saying that only (some) of the rich have the capacity to use wealth wisely? And that it'd be wiser to not enable workers to acquire wealth since they would only spend it in a vulgar manner? Perhaps they should be happy with their lot and have a few sessions of therapy to 'defer' their aspirations."

This statement from your post before last colors you a statist. How would the state be able to, in your words, "enable workers to acquire wealth"? Isn't there a public education system designed to do just that, of course failing as miserably as most public endeavors? Do you really suppose the state should regulate the production of wealth from worker to investor? Why do you scoff at the other side of the coin, then?

Cassius:

“One of the positive features of this site is that it's one of the few places where the philosophy of low expectations (environmentalism, sustainable development, anti-development theories) is given a merciless dressing down so it's surprising that someone should be advocating a greater 'self-command' to 'defer gratification'. It has echoes of sustainable development and the racist assumptions of 'culturally appropriate technologies' for the Third World.”

This statement from your post last colors you a trans-temporal multiculti zealot because it lumps the ancient advocacy of self-command into the same ridiculous lot as non-related modern moral philosophies. Consequently, what you’ve described is a class of historicism advocating universal tolerance, really meaning universal intolerance towards all moral philosophies, of course. But it’s racist nonetheless because it assumes that the race of universally tolerant modern man (although such men exist in the rarified and decaying air of Europe and North America’s eastern and western coasts) is superior to the intolerant, discriminating races gone before.

Cassius:

“As for the rest of that comment, I'm sure you'd quite like workers to just keep quiet and accept whatever their benevolent boss wants to pay them but most people are too busy trying to pay the mortgage, rent, kids clothes, education etc to bother waiting for a decent wage to be given from on high. As my dad used to say, "If you go cap in hand, you'll get a kick in the teeth" i.e. if you wait around for an 'inflation-busting' pay rise you'll be waiting a long time.”

I dig trade unionists, workers rights advocates, and the rest of their ilk. So full of self-righteous zeal, so sure a guy who can’t remember how to do long division but pushes the same button every two minutes 8 hours a day deserves $35 an hour with full medical that they’re willing to starve a foreign guy who can decompile object code in his sleep just to protect useless, outmoded jobs.

Moreover, bosses aren’t benevolent, they’re shrewd evaluators of human capital, which is usually why they’re bosses. So if you expect benevolence from trade unionists, workers rights advocates or your employer, you’d better not be a foreigner or employed by a good boss. And if you’re looking for help from on high, a little juice from political power, you got no other choice but go cap in hand to D.C., perhaps with a million other idiots in train, to demand fairness and social justice from the Great White Father.

Good luck: One crowd of idiots deserves another.

Typical Roy...
to decry the definitions he believes cast he and his class warfare ilk in a negative light and in the next breath confirm those very same definitions.

As tetracycloide rightly points out, Roy's language confirms what he tries to deny: socialist leanings if not a true love of Marxism.

Considering that the top 50% pay 96.54% of all income taxes while the top 1% pay 34.27%, I would say that out of Roy's "two Americas" the richer 50% more than pay their due. Just more confirmation that Roy has little understanding of economics outside of what Krugman whispers in his ear.

You want to talk inequality
I also find it amusing that the lawmakers who make the most noise concerning income inequality are the same people who inhabit the highest US tax brackets.
It must be difficult for the Kennedy's/Edward's/Pelosi's to contemplate the drudgery of the regular folk while they drink their expensive wines in the sitting rooms of their fancy estates.
Of course that won't stop them from raising MY middle-class (ok, upper-middle) tax rates, while their tax lawyers find new and more clever tax loopholes to hide their money.

DELAYED Gratification
When you go to college, you pay tuition and give up four years of your life with the expectation that in the long run, your investment will lead to a HIGHER standard of living. Take a lawyer, or better a doctor. How long before their investment pays off? When you consider the lost wages and lost savings and investments, it may take 5-10 years of work before education pays off, and longer if the individual was already capable of earning a high salary with just a BA.


Similarly, those who live below their means, like myself, do so with the knowledge that in the future I will have a higher standard of living that more than compensates me for what I've given up today. If it didn't, I would spend all my money today and save nothing. Unfortunately, even among college educated people are those who do not understand compound interest, in addition to lacking the willpower to save now in order that they may buy more tomorrow.



The reason why the people of the Third World in places like China and India are becoming wealthy is precisely because they understand that savings and investment leads to a much higher standard of living. We should abolish income and capital gains taxes entirely, and replace them with consumption taxes.

Oh, the burdens we must bear!
"Aren't Dividends already taxed twice. A corporation pays income taxes on any profits earned, and then, out of those profits, a dividend payment is made, which is then taxed again."

This is a popular misunderstanding. In fact, proceeds are taxed whenever there is an arm's length transfer.

When you earn your paycheck it is taxed. Then when you get a harcut, the same money is taxed again on your barber's return. Then when he buys a tankful of gas at your station, you get taxed again on it. The same dollar is back in your pocket, yet it has been taxed three times.

A corporation, let us not forget, is a legal person. So when it earns a dollar it pays a tax on it. And when it pays that dollar out to you in dividends, you get taxed on it. Buy a pizza with it and the shop owner will get taxed on it. It's still the same dollar.

Home sales are already exempt from taxation, if the net gain is under $200K and proceeds are reinvested in a set period of time in another home, as I recall. Check your Lasser's for details.

"Your cry for a more moral economic system leads only to pain and suffering."

I feel so badly for you. But be philosophical. It's only pain and suffering on your end of the stick. On the other end, it's all happiness and glee. :)

Explanation needed
"Please explain how raising the capital gains tax to previous levels will lead to spreading "our wealth more equally to those who have actually created it."?"

I'll be glad to. I'm not surprised you're having a little trouble with the concept.

Step one: everyone is paying their fair share into the federal coffers to fund the nation's collective expenses. An earnest attempt is being made to keep the budget in balance.

Step two: The tax structure is changed, so that the investor class only has to pay at a reduced rate-- while tax rates for the working class are hardly reduced at all. The budget is also thrown off kilter by sharp increases in corporate welfare, such as funding a massive and unnecessary ethanol program, or awarding federal largesse to power companies for building new coal-fired plants.

Step three (still in process): Revenues are flat, while expenses are way way up-- did I mention we also started some wars? All this money will have to be paid back some day, with interest. But the workers pay higher tax rates, so they can handle the lion's share of the extra principle and interest on these multi-trillion dollar loans.

Something has to give, though... Oh, I have it! Let's do away with social supports, which only benefit the people who have to pay the taxes. We'll cut Medicare and Social Security, then we'll have enough to finance some more wars. And by the way, give away more billions to the big energy companies.

The other approach would be to have income taxed the same regardless of origin, bring the troops home from these ruinous and futile wars, and tell all the corporations hanging onto the public teat that from this day forward they'll have to make their profits the old fashioned way-- by earning them.

Fair and equitable tax treatment
Nice way you have with twisting words. But you know exactly what I meant.

Whether someone earns his income by actually working, or whether it's his money that goes out and earns more income while he sits at home on his ass, both categories are income. And in any fair and equitable system they should be taxed at the same rates. Did I say workers should pay less? I did not.

You would also be aware that around 85% of investment money is under the control of ten percent of the population. So I believe you load the language to enlist a plea of sympathy for the little guy, the middle class investor. His little bucks should be treated the same way as the next guy's big bucks.

To indicate that the upper class deserves different treatment than the working class is in itself a moral plea, couched in "right" and "wrong". But it's a harder argument to defend. Let's just say we should not discriminate against source of income, but employ one single graduated tax scale for all persons-- including corporations, which are also legal "persons".

Re: Fair and Equitable Tax Treatment
I think fair and equitable tax treatment would really entail drastically scaling back the size and scope of government at all levels.

The modern liberal was invented by FDR who basically trashed the constitution in a vain bid to "solve" the depression by government fiat. Since then government has become a blank check for any polititian or special interest to feed at the taxpayer trough without any worry about it being "unconstitutional". The funny thing is that not only do we have this deplorable situation the roots of big government, however well intentioned, did not even "solve" the depression.

So you want fair an equitable tax treatment? How about cutting tax rates back to like the 10% or 15% (instead of the 40-50% it is now) it used to be and get government out the business of social engineering and micromanaging my life. Rich and poor would be much better off for it.

My ears are burning
How does that saying go again?

"The superior person talks about ideas.
The average person, about events.
And the inferior person, about other people."

You might want to address my points, not my person.

Now let me address yours. The top one percent earns eighteen times the income of the guy in the statistical middle. It goes without saying that he will be paying far more in taxes. Take a look at figure 1.5:

http://jec.senate.gov/Documents/Reports/HighestMarginalTax.pdf

He benefits far more than do members of any other income group in the American system. Income growth, for instance, has been flat for the past 25 years in the lower three quintiles. But it has gone through the roof for Mr top one percent. It's only fair that he be made to support it, proportionally to his own gain.

Government solutions
Oh, I think we've solved the Depression. The establishment of the Federal Reserve System, plus the growth of the international finance system following the signing of the Bretton Woods Agreement put us in a whole new ballgame. I don't think we'll be having another Depression like that one again.

And New Deal solutions enabled the general prosperity we now see. The middle class has grown and the upper class has prospered under that regime-- unless you think the 1950s were a time of increasing poverty and want.

Most Americans used to die destitute, dependent on the abilities of their families to take them in and feed them. So there has been great progress. And it has NOT been made on the backs of the rich-- which you will see by the information herein continue getting richer all the same.

http://jec.senate.gov/Documents/Reports/HighestMarginalTax.pdf

So permit me to shed a mock tear. We built the greatest system in history for creating a general prosperity. And now we want to selectively dismantle it, so the richest among us get to keep theirs and the peons are on their own.

then you can rejoice, because your dream has been acheived
Everyone in the US does have the same opportunity.

the more sucess you achive the less gains you get to reap from it?
the more you promote dimishing returns to sucess the more you encourage people to remain unsucessful.

furthermore the nominal difference between the top and bottom is only a difference in number, not in fact. in the last 25 years the difference in quality of life and goods between the top and the bottom has decreased dramatically. the fact that we see such small differences in quality between high priced goods and their low price counterparts indicates we are currently enjoying an unprecedented level of equality, not disparity.

you meant gains from capital aren't earned.
why else would you have used the adjective 'actual' to discribe the method of gain you prefer?

"You would also be aware that around 85% of investment money is under the control of ten percent of the population. So I believe you load the language to enlist a plea of sympathy for the little guy, the middle class investor. His little bucks should be treated the same way as the next guy's big bucks."

did you even read the article? most of those effected by the capitol gains tax are the middle class. the rich switch investments rarely. if we want to be fair we should lower the capitol gains tax considerably so that the middle class isn't getting hit by it several times while switch investment venues.

"To indicate that the upper class deserves different treatment than the working class is in itself a moral plea, couched in "right" and "wrong". But it's a harder argument to defend. Let's just say we should not discriminate against source of income, but employ one single graduated tax scale for all persons-- including corporations, which are also legal "persons"."

it's also not an argument i have ever made. no one should be taxed based on income, it is counter intuitive to penalize someone for doing what you want them to do i.e. sucess. i don't care how people succede, be it through 'actual' work or sitting at home on their ass studying markets and gaining returns from their own money, i want them to do it free from the penalty of any kind of income or capital gains tax.

also, you suggest we not discriminate based on source of income and then suggest one single graduated tax scale for all persons. this seems to be a contradiction since gains from all sources are not to the same scale.

Look at the Data
Properity was already growing prior to big government.

Capitalism and free markets has made this all possible not government programs. This is a common myth the liberals have distributed throughout the land all these years. Too bad you have no data to back it up.

You are completely deluded......
Not sure which country you're talking about. I thought we were talking about the United States.

Let's see your data regarding workers paying higher taxes and flat tax revenues.

Taxes are down for everybody, especially the poor and working class; see:

http://www.smbiz.com/sbrl001.html
and
http://www.cbo.gov/showdoc.cfm?index=6133&sequence=0



Regarding tax revenues, we are way up, see:

http://ftp2.census.gov/govs/qtax/table1.pdf

You are stuck in the 60's in almost every respect.

You still have not explained how raising taxes on the wealthy and on corporations puts more money in the pockets of the poor. Is there a program that you can cite for this?

And finally, I would be highly entertained if you could cite this fantasy program that gives away billions to the big energy companies. I think they earn every penny. And pay huge amounts of taxes.

In your snarky comments regarding our wars, you continually succeed in contradicting yourself. In the past, you have said that you are in favor of the war in Afghanistan and the GWOT, but not for the war in Iraq.

So, which is it?

Money in vested always starts as money earned...
...2 people start out guy 1 saves a little and buys a big commercial mower. Guy 2 saves no money but buys a little mower on terms. The first guy with his mower can mow a given yard in 1 hour the other guy takes 4 hours (big yard) to mow the same yard with his mower. The market rate for the yard is $30 the market rate for an empolyee is $10/hour. So guy 1 hires guy 2 for $10/hour. who is ripping who off?




Roy's govnmt dreams
Leave it to Roy to always look to more and bigger government. Don't forget, he's the guy who is on record here as saying that he thinks the old USSR was a feerer country and than the present Russia. Also, re the Fed, I guess it was created about 1913 because the government wanted to print more money, not after the depression, in order to solve that problem as he insinuates.

The poor man's dream in Calcutta
is to be a poor man in America

Outstanding Mr. Bennett
I shall have to remember this "I dig trade unionists, workers rights advocates, and the rest of their ilk. So full of self-righteous zeal, so sure a guy who can’t remember how to do long division but pushes the same button every two minutes 8 hours a day deserves $35 an hour with full medical that they’re willing to starve a foreign guy who can decompile object code in his sleep just to protect useless, outmoded jobs."

I have seen a news report where former employees of Ford (or GM, cannot recall) who negotiated lay-offs with full pay have become disgruntled because they have much money, but are bored with life. Ahhhh, America. This is paradise.
What beautiful fools you are.


The Fed
Yea I thought it was created earlier than the depression but I was at work and did not have time to check the actual date of creation.

Calcutta...and the rest
Right, the problems that America's poor have, are the problems most of the rest of the world would like to have.

No Difference: Meddling is Meddling
Most of us do not want everyone to earn the same wage, we want people to rewarded for being good at what they do and to stretch themselves and "be all they can be."

Is this supposed to be an endorsement? The essential problem is that liberals want to interject themselves in somebody elses commerce. It doesn't matter whether objective of the interference is absolute equality; or some "acceptable range".

Whats really interesting is that libs ARE ALWAYS worrying about somebody else's W-2, they want to fix wages but not the value supplied. How many times on this board have we been treated to indignant, emotionally based rants about WalMart, the minimum wage, C-suite comp and benes, etc.

Is it all "fair"? No, no more fair than somebody being born with the name Kennedy being treated to an elected office whenever they want it. Life is unfair, get used to it.

The simple fact remains. Life provides certain opportunities to all of us. Unfortunately, some of those opportunities come early in life when we don't understand them. A very, very few among us will have the aptitude, interest, opportunity and training to become CEO's, heart surgeons and Major-leaguers. A lot more will will make a lot less as mid-level managers, nurses and physical education teachers. Some jobs simply must pay more to attract rarer skills. There's no way you're ever going "be all you can be" as a fry cook, unless you translate that experience to another job. If there's any lack of dignity in being a trash collector, it comes from the left who regard such a job as the worst of indignities, rather than an essential public service-and reduce the job to its compensation.

The only time you won't here a hue and a cry from the left about multimillion dolar annual earnings is when its provided to some Hollyweird Star or when trial lawyers make millions with the consent of juries cherry-picked from Jerry Springer fans. Remember when George the 41st took honoraria after leaving office and there was all sorts of criticisms? Nary a peep when Bill Clinton took the same path.

As usual, the whole thing is unbalanced, emotional, and applied with double and triple standards.

You're just trying to justify greed
The bottom line is that while millions in the middle class own tiny amounts of investments, virtually all investment income is enjoyed by a very small number of people at the top. And if it is true, which I question, that they enjoy more of their income from preferentially taxed dividends than from preferentially taxed capital gains, it matters not a whit.

I suppose that's the reason rich folks have been clamoring for the past generation to have their capital gains taxes reduced-- so their friends in the middle class can enjoy the proceeds. It's a ridiculous premise.

What you are blatantly trying to support is the notion that people with more money should pay less to sustain this country than those people who do their work for them. And yes, I find this premise to be morally decayed.

The reason incomes are taxed is that we need government functions to continue, and that an income tax is more fair and means based than a consumption tax. You need to either get used to it or move to another country-- one more to your liking.

Capitalist nirvana
"Properity was already growing prior to big government."

Give me a year on that. I think prosperity collapsed due to a lack of big government, back in 1929. Weren't the 1920s a period of laissez faire capitalism, with no government controls? And didn't untrammeled speculation lead to the Mother Bubble of them all?

Your opposition of loosey goosey capitalism and socialist government programs is a creed designed to bamboozle the idiots out there. Don't waste your time. Just give me a good reason we should go back to the 1920s, thinking next time it will be different.

Pretending not to understand
"Let's see your data regarding workers paying higher taxes and flat tax revenues."

You're playing dumb here, but I know you understand I'm talking about the differential rates for earned and unearned income. If not, take a tax course.

And revenues have certainly been flat compared to our spiraling expenditures. I thought conservatives were supposed to believe in things like solvency and fiscal responsibility.

But here are some data you can use. The share of federal income provided by payroll taxes is growing, and that from corporate and unearned sources is shrinking:

http://www.cbpp.org/10-21-03tax.pdf

"You still have not explained how raising taxes on the wealthy and on corporations puts more money in the pockets of the poor."

What I'm saying, over and over again, is that the government has to be funded. And when the rich and corporations are legally allowed to pay lesser tax rates while their earnings, both before and after taxes, soar, working people have to take up the slack for them. There's just no way you can dance around this.

Capital gains tax break
Unfortunately you can also lose a lot under this system. I did this year. The capital gains system is still broke.

I had a house, but moved to a new job overseas for a couple years and when I came back I move to a new area. Long story- short; I got hosed when we bought the new house and sold the old one because I had not lived in it for a couple years. They should change it to exclude one house no matter what. If you own two or more then great.

home sales
"Home sales are already exempt from taxation, if the net gain is under $200K and proceeds are reinvested in a set period of time in another home, as I recall. Check your Lasser's for details."

Not always; you can fall thought the crack as I did.

I had a house, but moved to a new job overseas for a couple years and when I came back I moved to a new area. Long story- short; I got hosed when we bought the new house and sold the old one because I had not lived in it for a couple years. They should change it to exclude one house no matter what. If you own two or more then great.

I agree -- lets dump this social support welfare system we have.
It is not the governments responsibility to support anybody long term. No where in the Constitution does it state this. The role of government is to provide protection and a structured framework, and I will even go to the extent that it is their responsibility to provide ASSISTANCE. Assistance is NOT long term support, but a helping hand to get over a problem. It is not the government’s problem if you don’t care to plan for your future.

If you truly believe it is their responsibility, then you should be willing to hand over your entire pay and wait for them to provide you with a house, food, clothing and anything else you should need.

depression
Considering the depression was caused by govt mismanagement of the economy, then prolonged and deepened by further govt bungling, it's hard to say that we will never have another depression. Considering the govt is more involved in the economy then ever, and those who run the govt are no smarter, and no less arrogant than they were 70 years ago.

Where's your evidence that it was govt programs that created the wealth of the 50's? Where's your evidence that all the wealth created before that time were also caused by govt programs.

The fact that Americans are better off is due, 100%, to the fact that Americans are more productive. And this productivity is due 100% to the private sector. The only thing govt has ever done is slow down the rate at which the market makes people prosperous. All peopel.

your talking to a true believer
he actually believes that the only reason the sun comes up every morning is because govt regulations require it.

laissez faire
There has never been laissez faire economics in the US.
If you think that the 20's were characterized by this philosophy, then thay just proves how utterly ignorant you strive to remain.

The 20's were a time of huge tax and regulation increases.

The bubble was caused by the loose monetary policy on the part of the fed. It was then popped by an over reaction on the part of the fed.

Fact remains, that by the time the depression started, the market had recovered almost all of the value that it lost in the crash.

The depression had nothing to do with the private sector.

TCS Daily Archives