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One aspect of income inequality that hasn't been brought up is the ridiculous tax code. One could say it is designed to screw 99.9% of Americans so they have to pay up to 39.6% of their income to the feds. Whereas the truly rich in our society, the 0.1%, live off their long term capital gains and only pay 15%. In the past they implemented this to encourage people to invest, but I think we may be better off now to tax all income the same way.
A flat tax although appealing, would have to kick in after a certain salary to provide a minimal lifestyle.
One aspect of income inequality that hasn't been brought up is the ridiculous tax code. One could say it is designed to screw 99.9% of Americans so they have to pay up to 39.6% of their income to the feds. Whereas the truly rich in our society, the 0.1%, live off their long term capital gains and only pay 15%. In the past they implemented this to encourage people to invest, but I think we may be better off now to tax all income the same way.
A flat tax although appealing, would have to kick in after a certain salary to provide a minimal lifestyle.
1) There is a reason we tax capital gains at a lower rate: As a nation, we are better off encouraging capital formation.
2) The only way the rich can live off long-term capital gains is by actually selling their capital. This reduces their wealth.
3) Don't forget interest, dividends, and double tax-exempt munis. If you have a lot of capital, you may well have a lot of dividend income, which does not have a lower tax rate. Moreover, the dividends have already been taxed at the corporate level - so those dividend payments are taxed twice once the individual fills out his 1040. Own a lot of bonds? then you'll have a lot of interest which is not taxed at a lower rate. Double tax-free munis? They are tax-free to encourage the wealthy to invest in, for example, public sector utilities etc which are good for society.
No free person in his right mind would ever work for anyone or anything valuing himself 10000 times more than it values that particular person. Inequality takes coercion and coercive infrastructure, sraightforward and less direct. The more inequality - the less genuine freedom and more coercion is out there. Sure, increased economic output is another outcome of the institutionalized and sanctified coercion, just like a guy with a whip could squeeze some economic output from formerly blissfully indolent tribesmen,
but it doesnt really improve sense of wellbeing much. Lastly, inequality leads to accumulation of the power and wealth by certain small portion of society, which feels it's predestined by Gods to run and program lesser beings as to deliver even more power and wealth upstairs. Pretty much everything you do is getting done because it has a potential to increase inequality even more. The things that do not lead to greater inequality are not getting done, fought against or dismantled.
1) There is a reason we tax capital gains at a lower rate: As a nation, we are better off encouraging capital formation.
2) The only way the rich can live off long-term capital gains is by actually selling their capital. This reduces their wealth.
3) Don't forget interest, dividends, and double tax-exempt munis. If you have a lot of capital, you may well have a lot of dividend income, which does not have a lower tax rate. Moreover, the dividends have already been taxed at the corporate level - so those dividend payments are taxed twice once the individual fills out his 1040. Own a lot of bonds? then you'll have a lot of interest which is not taxed at a lower rate. Double tax-free munis? They are tax-free to encourage the wealthy to invest in, for example, public sector utilities etc which are good for society.
None of this applies to people with multimillion dollars investment accounts. They will never sell all of it, they've already formed their capital.
The capital gain tax is low because it benefits the people who have the most political clout.
There's an argument to be made that the tax bracket on income from salaries for people who make less than $300k a year should not be 3x as much as the capital gains tax. After all, most of it is "living wage".
I grew up in a relatively small town in east Tennessee that has a Fortune 500 chemical plant and once had numerous other manufacturing facilities. As in any large group of companies, there were a large variety of roles, from blue collar plant staff, to research scientists, to white collar office folks.
As time has gone by, many of the staff, blue and white collar, were offshored, outsourced to staffing agencies, eliminated due to more productive technology, or sent to major metros. One company that employed about 200 white collar staff sent all those jobs to metro Atlanta.
What the CEO is making does not necessarily impact me - just because he makes a dollar more, does not mean that someone else is making a dollar less, it does not need to be zero sum, theoretically.
What does matter to me is what someone elsewhere in a similar role makes in another location. At my last job in Tennessee, I was making slightly under $25,000/year - however, I took a similar job in Indianapolis that paid $50,000/year. While the cost of living in metro Indianapolis is slightly more, it in no way makes up the difference in salary. I moved back to TN in the summer and kept my "up north" salary, but this is fairly rare.
Not only have many better jobs, blue and white collar, vanished from small towns and rural areas, the jobs that do remain are often low wage junk jobs like call centers, food service, retail, etc.
You have increasingly fewer areas of the country that are the "winners taking most." To me, that's the true inequality.
I grew up in a relatively small town in east Tennessee that has a Fortune 500 chemical plant and once had numerous other manufacturing facilities. As in any large group of companies, there were a large variety of roles, from blue collar plant staff, to research scientists, to white collar office folks.
As time has gone by, many of the staff, blue and white collar, were offshored, outsourced to staffing agencies, eliminated due to more productive technology, or sent to major metros. One company that employed about 200 white collar staff sent all those jobs to metro Atlanta.
What the CEO is making does not necessarily impact me - just because he makes a dollar more, does not mean that someone else is making a dollar less, it does not need to be zero sum, theoretically.
What does matter to me is what someone elsewhere in a similar role makes in another location. At my last job in Tennessee, I was making slightly under $25,000/year - however, I took a similar job in Indianapolis that paid $50,000/year. While the cost of living in metro Indianapolis is slightly more, it in no way makes up the difference in salary. I moved back to TN in the summer and kept my "up north" salary, but this is fairly rare.
Not only have many better jobs, blue and white collar, vanished from small towns and rural areas, the jobs that do remain are often low wage junk jobs like call centers, food service, retail, etc.
You have increasingly fewer areas of the country that are the "winners taking most." To me, that's the true inequality.
People in those rural areas really need to consider moving to where the jobs of today's modern economy are. Trump can talk about bringing back those old tyme factory and mining jobs to those small towns/rural areas all he wants. But face it, those jobs were either automated or made redundant.
You have to evolve with the times or be left behind in poverty. You have to be willing to study a field like computer science, engineering, something that pays and is in-demand. Sitting around hoping that $40 an hour factory job to turn a bolt on an assembly line will come back is no option.
If you're truly concerned about income inequality, stop focusing on CEOs. They represent an extremely small portion of the population and you could distribute all of their compensation to their employees and it wouldn't make any difference. The real income inequality problem has to do with the disappearing middle class. Many of my engineering coworkers are in dual income households and even those in their 20s and early 30s have household incomes of over $200K. At my age (mid-50s), household incomes of $350K plus are the norm. Meanwhile, lots of hardworking folks would consider it a gift from heaven to have a household income of over $100K. This scenario impacts tens of millions of households, not just a few thousand CEOs.
One aspect of income inequality that hasn't been brought up is the ridiculous tax code. One could say it is designed to screw 99.9% of Americans so they have to pay up to 39.6% of their income to the feds. Whereas the truly rich in our society, the 0.1%, live off their long term capital gains and only pay 15%. In the past they implemented this to encourage people to invest, but I think we may be better off now to tax all income the same way.
A flat tax although appealing, would have to kick in after a certain salary to provide a minimal lifestyle.
Emphatically NO! I am all in favor of taking action on the ever-worsening socio-economic disparities in America, however, this claim is false once one adjusts for inflation (much of the so-called capital "gains" are only an increase in the number of dollars an asset is valued at, without changes in purchasing power).
Suppose that you buy a plot of land for $100,000 and later sell it for $500,000. However during this time the dollar lost so much purchasing power that $100,000 in the initial year is worth the same as $400,000 in the final year. This means that $300,000 of the $400,000 capital "gain" is in fact illusory, and only $100,000 of it is real.
If you pay a 15% tax on the $400k, you are actually paying a real rate of 60% on the true economic gain that you receive.
I have heard this argument about the rich paying 15% many times, but it highly distorts reality, because it does not take this inflationary effect into account.
1) There is a reason we tax capital gains at a lower rate: As a nation, we are better off encouraging capital formation.
I don't get this argument. Assuming there is a Laffer curve for capital gains, how do we determine the position of the peak? And since corporate executives are not personally liable for corporate bankruptcy, should we not also consider that low taxes encourage risk-taking by virtue of the fact that gains are private while losses are public? I don't claim to know what the optimal level of risk-taking is, only that it is definitely below what we had in 2004-2007!
Finally, could you not apply the same "encourage capital formation" argument to labor also? (If the workers did not contribute to the company's capital, would the company have hired them to begin with?)
CEOs are in a more competitive job market than the rest of us. If you compete in a job market that is saturated with people fighting over a few jobs, then the wages will be depressed.
Of course there are cases of company executives doing unethical and illegal things to inflate theor pockets but that isnt what i am referring to.
CEOs and their buddies suck companies dry. Look at Oracle for example. The company is the CEO's playground and the stock has flatlined at best for 10 years. I have no idea how to fix the situation because they control their salaries. I remember in Britain the CEO of BP wanted his usual raise and the stockholders did get angry due to the huge oil spill that ended up almost busting that company due to the writing checks to countless people that were not effected, but I digress. Let face it, the top 1% is way overpaid and there is no such thing as trickle down nonsense.
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