This is a serious question, and the point of this post isn't to advocate for socialism (I know some of you like to frequently make that accusation). I don't think anyone on this forum would be okay with feudalism. Those in power have all the resources, and the rest beg for what's left. How is that not happening again? the top 1% has seen a massive and disproportionate increase in wealth over the last few decades. Everyone else, including the top 5%, has seen marginal or no income growth at all. When our economy does well, very little changes for the poor (income wise). They stay poor, and social mobility in the US has been declining for decades. The richest 300 people have more money than the poorest 3 billion, and no doubt have more sway in our government than anyone.

Does a sharply growing income inequality bother you?

Not normally. Some people do better than others and there always wealth gaps. It is not the government's role to transfer wealth.

HOWEVER it is the government's role to make sure the markets are free, to reduce barriers to entry, and make sure the markets are not manipulated or slanted so every participant has an equal opportunity.

This is not the case today. Powerful interests use the government to do the opposite to preserve them from competition and maintain their position.

(07-20-2013 06:55 PM)ark30inf Wrote:  Not normally. Some people do better than others and there always wealth gaps. It is not the government's role to transfer wealth.

HOWEVER it is the government's role to make sure the markets are free, to reduce barriers to entry, and make sure the markets are not manipulated or slanted so every participant has an equal opportunity.

This is not the case today. Powerful interests use the government to do the opposite to preserve them from competition and maintain their position.

My thoughts are similar. The rich are allowed to f*ck with the economy, but it's not their fault when they screw it up. They get a free pass on policies that help them out, but policies that help everyone else are "anti-american". I don't get it, it's hypocritical.

Keep in mind that the graph is highly misleading.

It is based on incomes reported for federal income tax purposes (basically gross income/AGI reported on form 1040), which is clear if you read Saez's work. The problem with that is that the method of determining individual income for federal income tax purposes changed drastically as a result of the 1986 tax law (which you will notice is about the time the trend shifted).

How drastically did the definition of income change? Look at it this way--the top marginal tax rate dropped from 70% to 28% during the 80s, and at the same time individual tax revenues went up and the percentage of those total tax revenues paid by the top 1/5/10/20% (take your pick) went up by up to 8% (varies slightly by which group you pick). Do the math, and that simply isn't possible without a massive change in how income is defined.

By the way, for his research in this area Saez partnered with a French economist named Piketty. You may have heard his name before. He's one of the economists backing the current French president's call for a 75% tax on top incomes. Not exactly an objective pair to be looking at this.

Bottom line, the data in the chart for years after 1986 were not determined in the same manner as the data before 1987. So what is being proffered as a change in comparable data over time is not in fact that. It's apples and oranges.

(07-20-2013 07:07 PM)Owl 69/70/75 Wrote:  Keep in mind that the graph is highly misleading.

It is based on incomes reported for federal income tax purposes (basically gross income/AGI reported on form 1040), which is clear if you read Saez's work. The problem with that is that the method of determining individual income for federal income tax purposes changed drastically as a result of the 1986 tax law (which you will notice is about the time the trend shifted).

How drastically did the definition of income change? Look at it this way--the top marginal tax rate dropped from 70% to 28% during the 80s, and at the same time individual tax revenues went up and the percentage of those total tax revenues paid by the top 1/5/10/20% (take your pick) went up by up to 8% (varies slightly by which group you pick). Do the math, and that simply isn't possible without a massive change in how income is defined.

By the way, for his research in this area Saez partnered with a French economist named Piketty. You may have heard his name before. He's one of the economists backing the current French president's call for a 75% tax on top incomes. Not exactly an objective pair to be looking at this.

If you look at after tax numbers, there is a similar gulf.

Yet you don't seem to be concerned with the 48% of Americans who pay no income tax while the top earners pay the lion share. Or that more people in America are on govt assistance than not. Or the fact that our jobs end up going to illegal immigrants while the American worker pays for their govt assistance and medical care.

(07-20-2013 07:10 PM)dmacfour Wrote:  

(07-20-2013 07:07 PM)Owl 69/70/75 Wrote:  Keep in mind that the graph is highly misleading.

It is based on incomes reported for federal income tax purposes (basically gross income/AGI reported on form 1040), which is clear if you read Saez's work. The problem with that is that the method of determining individual income for federal income tax purposes changed drastically as a result of the 1986 tax law (which you will notice is about the time the trend shifted).

How drastically did the definition of income change? Look at it this way--the top marginal tax rate dropped from 70% to 28% during the 80s, and at the same time individual tax revenues went up and the percentage of those total tax revenues paid by the top 1/5/10/20% (take your pick) went up by up to 8% (varies slightly by which group you pick). Do the math, and that simply isn't possible without a massive change in how income is defined.

By the way, for his research in this area Saez partnered with a French economist named Piketty. You may have heard his name before. He's one of the economists backing the current French president's call for a 75% tax on top incomes. Not exactly an objective pair to be looking at this.

If you look at after tax numbers, there is a similar gulf.

Do you not understand that the after-tax numbers reflect exactly the same data problem as the first graph?

So lets say we have a 10 slice pizza. You're honked off because the one guy who gets 9 slices has to pick up more of the tip. You Republicans make perfect sense.

(07-20-2013 07:26 PM)Owl 69/70/75 Wrote:  

(07-20-2013 07:10 PM)dmacfour Wrote:  

(07-20-2013 07:07 PM)Owl 69/70/75 Wrote:  Keep in mind that the graph is highly misleading.

It is based on incomes reported for federal income tax purposes (basically gross income/AGI reported on form 1040), which is clear if you read Saez's work. The problem with that is that the method of determining individual income for federal income tax purposes changed drastically as a result of the 1986 tax law (which you will notice is about the time the trend shifted).

How drastically did the definition of income change? Look at it this way--the top marginal tax rate dropped from 70% to 28% during the 80s, and at the same time individual tax revenues went up and the percentage of those total tax revenues paid by the top 1/5/10/20% (take your pick) went up by up to 8% (varies slightly by which group you pick). Do the math, and that simply isn't possible without a massive change in how income is defined.

By the way, for his research in this area Saez partnered with a French economist named Piketty. You may have heard his name before. He's one of the economists backing the current French president's call for a 75% tax on top incomes. Not exactly an objective pair to be looking at this.

If you look at after tax numbers, there is a similar gulf.

Do you not understand that the after-tax numbers reflect exactly the same data problem as the first graph?

Maybe I don't get what you were trying to say, then. You said gross income, which I took to mean pre-tax income. I understand what you're getting at, but I don't see how that changes the more recent data still showing a massive increase in inequality.

(07-20-2013 07:16 PM)oklalittledixie Wrote:  Yet you don't seem to be concerned with the 48% of Americans who pay no income tax while the top earners pay the lion share. Or that more people in America are on govt assistance than not. Or the fact that our jobs end up going to illegal immigrants while the American worker pays for their govt assistance and medical care.

All of the reasons you listed don't justify anything, they just shift the blame to separate issues. You can't justify one problem by pointing out that there are other problems. The top earners pay the lions share because they hold almost all of the wealth. What the poor make is almost insignificant in comparison.

(07-20-2013 07:28 PM)Machiavelli Wrote:  So lets say we have a 10 slice pizza. You're honked off because the one guy who gets 9 slices has to pick up more of the tip. You Republicans make perfect sense.

You are making the logical fallacy that someone gave us a pizza to share. The one guy who gets nine slices paid for the entire pizza. He is sharing a slice with you. It's up to you to buy your own pizza or make it yourself from scratch.

(07-20-2013 07:32 PM)oklalittledixie Wrote:  

(07-20-2013 07:28 PM)Machiavelli Wrote:  So lets say we have a 10 slice pizza. You're honked off because the one guy who gets 9 slices has to pick up more of the tip. You Republicans make perfect sense.

You are making the logical fallacy that someone gave us a pizza to share. The one guy who gets nine slices paid for the entire pizza. He is sharing a slice with you. It's up to you to buy your own pizza or make it yourself from scratch.

Your version of the pizza doesn't make much sense either. The one guy who has nine slices convinced everyone else to make it for him, and got angry that the others think their time was worth more pizza.

This supposed free market country we live in has a level of inequality that is just as big as China's (no joke).

I have no problem with income inequality if it comes by way of a free society. However, govt. is the one enabling the "1%" to put more money on the line with less risk.

The solution isn't the govt. taking more from the rich. The solution is making it easier for the poor to "take" from the rich through fewer barriers to entry in the market and less protection for the established industry.

(07-20-2013 07:28 PM)dmacfour Wrote:  Maybe I don't get what you were trying to say, then. You said gross income, which I took to mean pre-tax income.

Maybe this will explain it. Here is the relationship of the various measures:

Gross income (GI)
- Adjustments to gross income
= Adjusted gross income (AGI)
- Deductions
= Taxable income
- Taxes (basically, tax rate times taxable income)
= After-tax income

So what happened in 1986 (and to a lesser extent 1982) is that the definitions of GI and Deductions changed dramatically. So dramatically that for the top brackets taxes went up even though the tax rate was cut to less than half its pre-1982 level.

That means that the data used by Saez are not comparable for the pre-1987 and post-1986 periods. And that would obviously hold whether the measure graphed is GI or AGI or taxable income or after tax income.

(07-20-2013 07:45 PM)Owl 69/70/75 Wrote:  

(07-20-2013 07:28 PM)dmacfour Wrote:  Maybe I don't get what you were trying to say, then. You said gross income, which I took to mean pre-tax income.

Maybe this will explain it. Here is the relationship of the various measures:

Gross income (GI)
- Adjustments to gross income
= Adjusted gross income (AGI)
- Deductions
= Taxable income
- Taxes (basically, tax rate times taxable income)
= After-tax income

So what happened in 1986 (and to a lesser extent 1982) is that the definitions of GI and Deductions changed dramatically. So dramatically that for the top brackets taxes went up even though the tax rate was cut to less than half its pre-1982 level.

That means that the data used by Saez are not comparable for the pre-1987 and post-1986 periods. And that would obviously hold whether the measure graphed is GI or AGI or taxable income or after tax income.

That makes sense. But it doesn't seem to change that the inequality jumps sharply in the mid 90's, long after the 1986 change (according to the second graph). It actually appeared to go down for awhile after 1986.

(07-20-2013 07:34 PM)dmacfour Wrote:  Your version of the pizza doesn't make much sense either. The one guy who has nine slices convinced everyone else to make it for him, and got angry that the others think their time was worth more pizza.

This supposed free market country we live in has a level of inequality that is just as big as China's (no joke).

No one forced anyone to help him make the pizza.

(07-20-2013 07:44 PM)RaiderATO Wrote:  I have no problem with income inequality if it comes by way of a free society. However, govt. is the one enabling the "1%" to put more money on the line with less risk.

The solution isn't the govt. taking more from the rich. The solution is making it easier for the poor to "take" from the rich through fewer barriers to entry in the market and less protection for the established industry.

This.

One additional point. "Progressive" taxes are not the way to narrow the inequality, if that is your goal. We have the most "progressive" tax structure in the world, and the greatest inequality. And as our tax structure has grown steadily more progressive compared to the rest of the world, our income "distribution" has become more unequal.

I put "distribution" in quotes because there is a serious fallacy in this whole argument. To speak about "distribution" requires the assumption that there is this pot of income out there and the only issue is how you divvy it up. The slices of pizza in Mach's example. But that's not how it works. The way you even up incomes and wealth is not by taking a slice from the "rich" and giving it to the poor. It's by increasing the number of slices--or pizzas--in total. The "rich" are going to get theirs. If you take more slices of their pizza than somewhere else does, they will take future pizzas to the somewhere else. And everybody loses in that scenario, it's just that the "rich" lose less than the rest of us. What we want is for the "rich" to bring all their pizzas here to share. And the way to do that is to give them a better deal.

(07-20-2013 07:51 PM)Tiguar Wrote:  

(07-20-2013 07:34 PM)dmacfour Wrote:  Your version of the pizza doesn't make much sense either. The one guy who has nine slices convinced everyone else to make it for him, and got angry that the others think their time was worth more pizza.

This supposed free market country we live in has a level of inequality that is just as big as China's (no joke).

No one forced anyone to help him make the pizza.

There is no alternative to working for someone. The only choice is for who.

(07-20-2013 07:53 PM)Owl 69/70/75 Wrote:  

(07-20-2013 07:44 PM)RaiderATO Wrote:  I have no problem with income inequality if it comes by way of a free society. However, govt. is the one enabling the "1%" to put more money on the line with less risk.

The solution isn't the govt. taking more from the rich. The solution is making it easier for the poor to "take" from the rich through fewer barriers to entry in the market and less protection for the established industry.

This.

One additional point. "Progressive" taxes are not the way to narrow the inequality, if that is your goal. We have the most "progressive" tax structure in the world, and the greatest inequality. And as our tax structure has grown steadily more progressive compared to the rest of the world, our income "distribution" has become more unequal.

I put "distribution" in quotes because there is a serious fallacy in this whole argument. To speak about "distribution" requires the assumption that there is this pot of income out there and the only issue is how you divvy it up. The slices of pizza in Mach's example. But that's not how it works. The way you even up incomes and wealth is not by taking a slice from the "rich" and giving it to the poor. It's by increasing the number of slices--or pizzas--in total. The "rich" are going to get theirs. If you take more slices of their pizza than somewhere else does, they will take future pizzas to the somewhere else. And everybody loses in that scenario, it's just that the "rich" lose less than the rest of us. What we want is for the "rich" to bring all their pizzas here to share. And the way to do that is to give them a better deal.

What's happening is more pizzas are being made, and the rest of us are only getting a share of the original pizza. The rich benefit wildly from a growing economy, and the poor just continue being poor. That's what I was trying to get at.

(07-20-2013 07:48 PM)dmacfour Wrote:  

(07-20-2013 07:45 PM)Owl 69/70/75 Wrote:  Maybe this will explain it. Here is the relationship of the various measures:
Gross income (GI)
- Adjustments to gross income
= Adjusted gross income (AGI)
- Deductions
= Taxable income
- Taxes (basically, tax rate times taxable income)
= After-tax income
So what happened in 1986 (and to a lesser extent 1982) is that the definitions of GI and Deductions changed dramatically. So dramatically that for the top brackets taxes went up even though the tax rate was cut to less than half its pre-1982 level.
That means that the data used by Saez are not comparable for the pre-1987 and post-1986 periods. And that would obviously hold whether the measure graphed is GI or AGI or taxable income or after tax income.

That makes sense. But it doesn't seem to change that the inequality jumps sharply in the mid 90's, long after the 1986 change (according to the second graph). It actually appeared to go down for awhile after 1986.

Two things:
1. A few years were required for people to move money and investments around before the effects were really felt. Tax policies generally impact the economy 2-3 years downstream for that reason.
2. The economy slowed from 1989-92 or so, and again from 2000-02 or so, and in both charts you see some downturn in inequality then. Both the dot.com boom of the 90s and the housing boom in the middle of the 2000s decade were largely driven by investing and paper gains rather than real increases in productive activity, and therefore it was the investor classes who took part most heavily. So we have seen inequality increase in booms and decrease in busts. So long as we remain a retail/service economy, that trend will be pretty much inevitable. So, do you live with inequality to get growth, or do you blow off growth to get equality?

The real answer is that we need to transform ourselves back to a producer economy. When the going business is manufacturing, you have to pay the skilled workers or they walk and you can't run your plant. When the going business is retail, employees are a dime a dozen so the owner can pay them less and put more into his pocket.

Ross Perot said it well. The guy who ran a steel mill in the 1950s has a grandson or granddaughter today who works for Wal-Mart or Pizza Hut, and you simply cannot pay people as much to greet people or deliver pizzas as you must pay them to run a steel mill. Unfortunately, he said that in 1992 and things have gotten worse in that regard, not better, ever since.