Ray Jay wrote:I just don't agree with your premise. Although there are some problems with preferential rates in the U.S., as a share of total taxes, the rich pay more than their share. There's a lot of complexity here as it relates to social security taxes (do we include it in the calculation), definition of income (do we include transfer payments), how to consider corporate taxes, estate taxes, property taxes, etc., but on balance you haven't proven to me that the "rich pay much less as a percentage". (And I'm a CPA with a tax specialty.)

Great! Now that we have a CPA on the case, I'm sure we can figure all this out!

As you recall, we've had some great discussion on this in this topic in this forum:

http://redscape.com/viewtopic.php?f=4&t=434

It included a discussion on this editorial by the noted socialist Warren Buffett:

http://www.nytimes.com/2012/11/26/opinion/buffett-a-minimum-tax-for-the-wealthy.html

And many comments that included this one by you:

1. The super rich (e.g. Buffet) do pay less in taxes.

So maybe I don't have to prove anything to you. Or did your opinions change?

Cheekiness aside, high income earners could pay a lot in taxes, or they could pay very little in taxes. It all depends on how they earn their income and what they do with their wealth. The most preferential income rates belong to categories where the wealthy generally have much more than those who are not wealthy. For some reason this principle is accepted as reasonable, while if it were explained this way: if you work and make a reasonable living, you get taxed at a higher rate than those who passively live off their investments. That's crazy.

More data here on how the rates for the very wealthy have changed over time:

http://www.whitehouse.gov/sites/default/files/Buffett_Rule_Report_Final.pdf

Maybe the real question, though, is instead of asking me to convince you about taxes on the wealthy, is to clarify where you think Mr. Buffett got it wrong.

From this article http://www.theguardian.com/money/us-mon ... care-taxes it appears that the NYT figures are post-tax income.

Which means that it already accounts for how much tax the rich and others pay. Even after paying 'their fair share', of tax, the rich are getting richer far quicker. It would also seem to include SS payments (as they are also included before you get to post-tax income in standard calculations), which covers a lot of people in the lower income brackets.

In the absence of detail in the data (and if you have concerns, RJ, you are free to do some research and show us how 'transfers' are affecting these groups), can we look at the overall picture here?

Growing inequality is not healthy for a society. It promotes envy, which I know you are concerned about, RJ. It also means that in a growing economy, those at the middle & bottom are not getting the benefits of their own efforts - other people are. Unchecked (and in a society where money talks), it leads towards plutocracy.

What numerical figure equates to "fair share"?

bbauska wrote:What numerical figure equates to "fair share"?

Not that old chestnut, son. I've answered this simplistic stuff before and you return to it like a dog to a bone.

As 'fairness' is not a completely objective thing, it rather relies on an aggregation of subjective positions, there is not a simple one number answer.

Twas your bone that keeps getting thrown out. You and Geojanes keep using that term, and I want to know what you mean by it?

GEO wrote:
Geo: And many comments that included this one by you:

Ray Jay wrote: 1. The super rich (e.g. Buffet) do pay less in taxes.

So maybe I don't have to prove anything to you. Or did your opinions change?

What page did I write that? I couldn't find it. (I believe you, I just want to see it.)

GEO wrote: Geo: Maybe the real question, though, is instead of asking me to convince you about taxes on the wealthy, is to clarify where you think Mr. Buffett got it wrong.

I think you have a timing issue. In 2012 the top tax rate on income 35%. In 2013 it is 39.6%. In addition, with the ACA hike, there's an additional tax of 3.8% on unearned income (including interest, dividends, cap gains, and passive rents. Those are 2 very large changes.

I also think that Buffett is not including all of the taxes that he pays. He owns companies that pay large corporate tax. As a shareholder he is incurring this tax even if he is not paying it directly.

By the way, from his article: Our government’s goal should be to bring in revenues of 18.5 percent of G.D.P.

This site estimates http://www.taxpolicycenter.org/taxfacts ... ?Docid=205
we will be at 19% by the end of Obama's presidency. So, Buffett's goal has been met. And for the most part the taxes increases have been on the wealthy.

I'm not saying the tax code is ideal. I think there are problems in it in all directions. I'm just saying that the notion that the rich are getting a free ride is not accurate. Yes, there are some cases where the code is being manipulated. But overall, the rich are paying their fair share.

[Changed to put in quotes]

danivon wrote:From this article http://www.theguardian.com/money/us-mon ... care-taxes it appears that the NYT figures are post-tax income.

Which means that it already accounts for how much tax the rich and others pay. Even after paying 'their fair share', of tax, the rich are getting richer far quicker. It would also seem to include SS payments (as they are also included before you get to post-tax income in standard calculations), which covers a lot of people in the lower income brackets.

In the absence of detail in the data (and if you have concerns, RJ, you are free to do some research and show us how 'transfers' are affecting these groups), can we look at the overall picture here?.

I don't have time to dissect the data right now, but that doesn't mean I'm wrong. I still think you have to delve into the detail. if the lowest 20% is getting their income from transfer payments, I don't understand how their income declined so much during the great recession. Social security payments increased slightly during this period, and food stamp payments increased. I also question the assumption that the same people are in the same percentile year after year. Many entrepreneurs (myself included) have widely varying income from year to year. Perhaps there are small business owners included in this percentile from 2009 to 2012 who lost their shirts, but they are back on track.

If people are getting transfer payments as opposed to working for a living, I don't know that their standard of living should improve. Perhaps the levels provided by transfer payments were appropriate in 1980 and they are appropriate now?

I do feel a lot of sympathy for some of the poor. Some people are there for no fault of their own and are not happy about handouts. But there are lots of other people who could care less. They may be there because they've never had a desire to work, or they are addicts, including alcoholics, or they chose to have a baby at 15.

danivon wrote: Growing inequality is not healthy for a society. It promotes envy, which I know you are concerned about, RJ. It also means that in a growing economy, those at the middle & bottom are not getting the benefits of their own efforts - other people are. Unchecked (and in a society where money talks), it leads towards plutocracy.

I don't think inequality alone promotes envy. Politicians and the media also promote envy. I also don't see how you can say the middle is not getting the benefits of their own efforts. I'm looking at the graphs -- without smoothing (I get it!) --- and it shows that the 50th percentile has had their after tax income increase by about 30% inflation adjusted over the last 30 years which includes the awful 20 years of Reagan and Bushes and the 8 Clinton years that Ricky complains about. So, the middle is getting the benefits of their own efforts.

BTW, I do agree there are problems where money has too great a voice in politics.

ray

I also don't see how you can say the middle is not getting the benefits of their own efforts.

There's broad consensus that the middle class is getting less than before.... You're kind of a lone voice on this Ray.
Here's one clue that the middle class is falling behind. There are fewer Americans today self identified as middle class..

The proportion of Americans who identify with the middle class has never been lower, dropping to 44% from 53% in 2008 during the first months of the Great Recession, according to a survey conducted Jan. 15-19. The share of the public who says they are in the lower or lower-middle classes rose by 15 percentage points, from 25% in 2008 to 40% today

.

http://www.pewresearch.org/key-data-poi ... ta-points/

Your beef with the data from the Luxemburg Income Study also seems to amount to : "They did the numbers wrong". and somehow that strikes me as shouting at the wind. Before publishing they would have reviewed the information and data hundreds of times and it definitely should hold up to scrutiny...

I don't think its a question of is there income inequality. Its a question of whether or not its necessary.
Defenders of policies that exacerbate income inequality, progressive taxation or social benefit systems, have always claimed that economic growth is crippled by these policies. And that be crippling growth the middle class would be hurt. everything that comes from this LIS report counters that notion...

“

The crisis had no effect on our lives,” Jonas Frojelin, 37, a Swedish firefighter, said, referring to the global financial crisis that began in 2007. He lives with his wife, Malin, a nurse, in a seaside town a half-hour drive from Gothenburg, Sweden’s second-largest city.

They each have five weeks of vacation and comprehensive health benefits. They benefited from almost three years of paid leave, between them, after their children, now 3 and 6 years old, were born. Today, the children attend a subsidized child-care center that costs about 3 percent of the Frojelins’ income.

Even with a large welfare state in Sweden, per capita G.D.P. there has grown more quickly than in the United States over almost any extended recent period — a decade, 20 years, 30 years. Sharp increases in the number of college graduates in Sweden, allowing for the growth of high-skill jobs, has played an important role.

Elsewhere in Europe, economic growth has been slower in the last few years than in the United States, as the Continent has struggled to escape the financial crisis. But incomes for most families in Sweden and several other Northern European countries have still outpaced those in the United States, where much of the fruits of recent economic growth have flowed into corporate profits or top incomes.

http://www.nytimes.com/2014/04/23/upsho ... .html?_r=1

Ray Jay wrote:What page did I write that? I couldn't find it. (I believe you, I just want to see it.)

Page 7 31 Jul 2011, 8:46 pm

geojanes wrote:

Ray Jay wrote:What page did I write that? I couldn't find it. (I believe you, I just want to see it.)

Page 7 31 Jul 2011, 8:46 pm

Got it. I stand by that. There's a lot of discussion in those pages differentiating between the rich and super rich. There are cases where the super rich underpaid. But in general the rich pay their fair share. I've also noted a WSJ article that Buffett is not including the entire situation because of the corporate taxes his companies pay which often results in the preferable rates that you object to. Dividends get a preferential rate because we are already paying taxes on the corporate income (at a very high rate).

Ricky: You're kind of a lone voice on this Ray

Complement accepted.

Ricky: Your beef with the data from the Luxemburg Income Study also seems to amount to : "They did the numbers wrong". and somehow that strikes me as shouting at the wind. Before publishing they would have reviewed the information and data hundreds of times and it definitely should hold up to scrutiny...

NOT TRUE. I'm questioning your interpretation of the data. You've stopped analyzing it because at first blush it generally supports your world view; however, if you delve into the data you have to raise additional questions such as migration of individuals among percentiles. I'm also looking at absolute increases in standards of living per the data and you have not disputed my conclusions at all. Look again at the 50th percentile, smoothed or unsmoothed. It shows absolute increases in standards of living!

Finally complaining about uneven tax rates when looking at pre-2013 data make no sense since we have had 2 large tax increases since then which have mostly hit the upper middle class and above.

ray

I'm also looking at absolute increases in standards of living per the data and you have not disputed my conclusions at all

i did.

The proportion of Americans who identify with the middle class has never been lower, dropping to 44% from 53% in 2008 during the first months of the Great Recession, according to a survey conducted Jan. 15-19. The share of the public who says they are in the lower or lower-middle classes rose by 15 percentage points, from 25% in 2008 to 40% today

ray

Finally complaining about uneven tax rates when looking at pre-2013 data make no sense since we have had 2 large tax increases since then which have mostly hit the upper middle class and above

.

Fair enough. But the quotation above from Pew comes after the tax adjustments came into being..
Essentially any fiddling since the crash on tax rates, and changes to benefits to poor and middle class, hasn't been felt.
People feel poorer. And the LSI study comparing other countries confirms their suspicions.
Probably because although incomes went up about the rate of inflation a lot of things affecting the middle class and working poor escalated at more than the average rate of inflation. Health insurance and education costs for instance.
And those are things that people in other countries were either largely unaffected or if affected, then to a much lower rate than the American Middle class.




.

Ray Jay wrote:I don't have time to dissect the data right now, but that doesn't mean I'm wrong.

Sure, but it far from makes you right.

I still think you have to delve into the detail. if the lowest 20% is getting their income from transfer payments, I don't understand how their income declined so much during the great recession. Social security payments increased slightly during this period, and food stamp payments increased.

Social Security payments are included as 'Income'. But remember that while the amounts went up, inflation and the number of claimants may mean the amounts going to actual people is worth less than before.

There is also the question of whether all of the people in the lower deciles are actually receiving such transfer payments. It may be that they are working on low wages.

I also question the assumption that the same people are in the same percentile year after year. Many entrepreneurs (myself included) have widely varying income from year to year. Perhaps there are small business owners included in this percentile from 2009 to 2012 who lost their shirts, but they are back on track

It is not an assumption that I make. Sure people will move around over time. However, it is of note that in the US social mobility is low and declining, compared to other western nations, meaning that people are likely to be in the same relative position as their parents were a generation ago.

If people are getting transfer payments as opposed to working for a living, I don't know that their standard of living should improve. Perhaps the levels provided by transfer payments were appropriate in 1980 and they are appropriate now?

You assume that people getting such 'transfer payments' are not working, or have not been? Surely most people receiving SS payments have previously been paying SS on their wages (in order to qualify for contribution-based payments). A lot of the people getting 'transfer payments' are seniors who worked for decades and paid into the system on the promise of a reasonable retirement. I don't think that they should be getting worse off, frankly.

And while you are getting around to the detail of income and transfer payments, perhaps you could look at what the relative purchasing power of such 'transfer payments' is over that 30 year period.

I do feel a lot of sympathy for some of the poor. Some people are there for no fault of their own and are not happy about handouts. But there are lots of other people who could care less. They may be there because they've never had a desire to work, or they are addicts, including alcoholics, or they chose to have a baby at 15.

Interesting that you see 'some' of the poor as deserving your sympathy, but 'lots' of them as not. Suggests perhaps that you see more of them as 'undeserving' than not. Perhaps that is not what you intended, but it's an interesting choice of words.

Also, I consider that your attitude towards addicts ignores what addiction is (a condition where someone has lost their free will), and also to young parents. The 'choice' to have a baby tends not to come out of thin air. It usually is a choice made after mistakes (and as we are talking about minors, should we judge them for the rest of their lives based on a childhood mistake?), and a choice between abortion and continuing to term, followed by a choice between keeping a child and giving it away. Neither choice is particularly easy, and is one that we middle-aged men do not have to make.

I don't think inequality alone promotes envy. Politicians and the media also promote envy.

Such as envy of the poor on their lavish 'transfer payments'? Yes, I've seen that. I can see that you do have a sense of the unfairness of people who do little/no work getting money or other benefits. Is that sense of unfairness simply generated by politicians or the media, is it envy, or is it rational?

While people can play on envy, it is also a natural reaction to seeing others you feel are 'undeserving' getting what you cannot.

I also don't see how you can say the middle is not getting the benefits of their own efforts. I'm looking at the graphs -- without smoothing (I get it!) --- and it shows that the 50th percentile has had their after tax income increase by about 30% inflation adjusted over the last 30 years which includes the awful 20 years of Reagan and Bushes and the 8 Clinton years that Ricky complains about. So, the middle is getting the benefits of their own efforts.

Only if their productivity had gone up by 30% or less in real terms.

http://www.tradingeconomics.com/united- ... oductivity - change the date range to match the one in the NYT article, 1980-2010. The start point is just under 55. The end point is over 100. The figures are real term output per unit of labour, and show an increase of at least 81%

And GDP per capita?

http://www.tradingeconomics.com/united- ... per-capita - again with the 1980 - 2010 range, and shows real terms (based to 2005) data so controls for inflation:

Starts at about $26500. Ends at about $43000. Increase of about 62%

The speed at which Americans are becoming more productive, and that the country is becoming richer per capita is much faster than the speed at which the median American is becoming richer. Ok, so they are 'absolutely' better off, but they are not getting an equivalent return on improved productive effort.

So I so not agree that they are getting all of the benefits of their efforts. The poorest are not getting much of that surplus either (even after 'transfer payments', I suspect), but the rich are, even after having to pay taxes.

Now it could be that it's only the 'rich' who have been increasing productivity, but frankly I don't buy that without some hard data.

BTW, I do agree there are problems where money has too great a voice in politics.

And we should be wary of what the politicians who are bought and paid for with that money are saying. This applies to any party, but of course in particular politicians who voice the needs of the rich or act in their interests rather than of the majority.

Ray Jay wrote:I think you have a timing issue. In 2012 the top tax rate on income 35%. In 2013 it is 39.6%. In addition, with the ACA hike, there's an additional tax of 3.8% on unearned income (including interest, dividends, cap gains, and passive rents. Those are 2 very large changes.

Hey, Obama finally fixed something! That's news!

More seriously, this sidebar on taxes is mostly off-topic and I will leave it, for now. When I have more time and inclination, I may pick it up later, because it's a good question: How did the recent tax increases impact tax rate differences?

isn't fixed another word for neutered? (joke)