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JEleazarian
Trad climber
Fresno CA
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Sorry for my slow response, Bill, but juggling three different jobs at the moment -- law, economics and classical music (in order of profitability -- there is, after all, a reason why we call the opposite of classical music popular music) left me too little time to play.
First, as I noted much earlier upthread, I have no particular desire to redistribute wealth. Neither I nor my family are among the particularly wealthy by United States measure (though we certainly are by the world's), so I'm not being merely self-interested. I find it appalling that so many think the way to "fairness" is through what looks to me more like theft. Thrift serves a vital economic purpose. What right have we to punish it?
More fundamentally, focusing on the wealth share alone ignores far more important issues:
1. Has absolute wealth increased? If my wealth, measured in constant dollars, increases by, say, 10%, but my share of total wealth diminished, am I worse off or better off? Unless you legitimize envy, I'm better off. Charts like the one you've posted don't mesaure anything but the share of wealth.
2. Similarly, shouldn't we know why the relative distribution of wealth changed, and who got more and less, before we conclude that greater wealth inequality is bad? Maybe the share of the most wealthy in the 1990's increased because of the boom in information technology, which enriched the world but enriched its pioneers more. Is that bad? Similarly, if certain groups are becoming less wealthy because of their behavior, shouldn't we try to recognize what behavior enhances increasing wealth and encourage it, rather than creating a moral hazard by rewarding wealth-dissipating behavior.
Understand, I'm not saying that everyone who lost wealth did so because they acted badly. The nature of a market economy provides rewards for anticipating what people want, and punishment for failing to do so, but many, if not most, economic actors have neither the temperament nor the ability to truly direct their paths. I would have a hard time berating construction workers, say, who are out of a job because of a building boom and bust over which they had no real say. Moreover, I think a just society will try to aid people like that when times are tough. I have no trouble with the concept of using income taxation to bring about that aid.
I feel the same way about those who made an honest attempt at running a business, but didn't make it. A just society shows compassion.
I feel a lot less sorry, though, for a dirtbag climber who bemoans the fact that he lacks the wealth of a doctor who spent his weekends and nights in the library, in school, in internship, residency and fellowships, instead of on the rocks and in the climbing gym. They had a choice. It strikes me as unjust to take from those who made wise choices to give to someone who consciously chose self-gratification over doing something for which others were willing to pay.
3. Also, as Dave and I and others have been unsuccessfully trying to point out, the identity of the wealthy isn't a constant. I think it's a good thing that new people can join the wealthy.
Nonetheless, for the sake of argument, let's assume that the country has decided that theft is moral and wants to redistribute wealth. My objection remains that if you want to redistribute wealth, why redistribute income instead? Despite Hedge's objection, the way people move up in wealth is to obtain income, then spend less than they obtained. If you tax the highest marginal incomes heavily, you simply guarantee that it will be a long time before anyone new joins the very wealthy.
More importantly, the empirical evidence shows that it does not work. I already cited one famous Federal Reserve Bank of Boston study showing that the increasing disparity of wealth started in the 1990's -- after we raised the marginal rates on the highest income brackets, rather than in the 1980's or 2000's, when we lowered them.
Therefore, if you want to redistribute wealth, go directly to wealth. We did that for decades in the form of gift and death taxes. Set a floor of some fairly high level (say, $10,000,000) and tax the excess of that amount, either as a flat tax or in increasing marginal rates. That would be the way most likely to change the short-term wealth distribution. Of course, it has several problems, which is why we've tended to move away from it:
1. Wealth isn't as easy to verify as income. We have a reporting system with a long history that makes it difficult for people to hide income. We have the payors filing W-2's and 1099's, reporting large cash transactions, and an IRS geared to spot income tax cheats. If we still have tax cheats now, imagine what would happen if we try to do that with wealth.
Here in the San Joaquin Valley, we already have lots of experience with that, in the form of the "Mississippi Christmas Trees" farmers put together for receiving federal water project water in the days of the 160-acre limit. They made elaborate confections of persons and entities allegedly owning land that made it quite difficult to determine the number of acres in which any particular individual had a beneficial interest. How do you determine if John Doe owns Blackacre when title is in the name of XYZ, LLC, an entity each of whose members is an off-shore trust?
2. Wealth is difficult to calculate. What accounting system do we use? Must the taxpayer hire independent appraisers each year and require mark to market, or do we just calculate GAAP wealth based on cost?
3. Wealth is illiquid, so paying a large tax on it could require economically costly liquidation of assets with great economic disruption. Again, I've seen this over the years in farming when the death taxes were particularly onerous. Even though the death tax was payable in installments, it was often way too high (40% + of the taxable gross estate) to pay ever using historic American profit levels. I've seen far too many family farms gobbled up by large farming organizations when the family was forced to get outside land financing to pay the death tax within the deadline, then couldn't service the new debt.
Similarly, the value of a business, which is the primary source of wealth of most business owners, does not lend itself well to paying high taxes without destroying the business itself. In contrast, the income tax has several rules that recognize income when the taxpayer is sufficiently liquid to pay, and ignore it when the taxpayer is not.
Those considerations, along with a feeling among a substantial part of the population that the estate and gift tax was manifestly unfair because of its very high rates, led to a de-emphasis on death taxes and more reliance on income taxes. We've already seen how well that worked out.
So in the real world, there's no easy answer. Still, to me, if you want a different distribution of wealth, you tax wealth, not income.
Sorry to be so belligerent and rambling. If I were less tired, I'd be more succinct and conciliatory.
John
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sempervirens
climber
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JohnL, there are some holes in your arguments.
We don't have a free market economy. I've shown that a couple times up thread.
Marginal tax rates are not the same as Effective tax rates (i.e. the rates actually paid). Corporate tax rates in US are high, but if profits are sent off-shore and thereby taxes avoided the effective rate can be zero, or even negative when other tax deductions and credits are figured in. In some cases the effective rates are simply very low because not all the profits are sent off-shore and therefore some tax paid.
As you state wealth is difficult to calculate, verify, report and tax. Perhaps that is why we tax income instead.
Let's forget about comparing the dirtbag non-working climbers to the hard-working entrepreneurs. There will always be both of these who get what they deserve. But the graphs presented at the start of this thread show the growing wealth divide. We probably agree on how that divide negatively affects democracy, jobs, education, society and the economy.
Have you checked out the documentaries: We're not Broke; Inside Job, The 1%? They are well done and informative, not the Michael Moore-type cheap shots or typical liberal biased rantings. Many interviews slamming Clinton, Bush, Greenspan,et. al.
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Ken M
Mountain climber
Los Angeles, Ca
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I feel a lot less sorry, though, for a dirtbag climber who bemoans the fact that he lacks the wealth of a doctor who spent his weekends and nights in the library, in school, in internship, residency and fellowships, instead of on the rocks and in the climbing gym.
John, there are some implicit issues that you don't appear to recognize:
library-which the doc didn't pay for
school-which the doc didn't pay for
hospitals-which the doc didn't pay for
loan programs for all-which the doc didn't pay for
entering a profession which entails license protection....investigators, prosecutors, judges, courts, juries, courthouses-which the doc didn't pay for.
So your theoretical doc takes basically free advantage of all of these things provided by *society*
Where is the payback?
We can look at your profession, or any occupation that has a huge payback....developers, for example.
Where is the payback?
All of these people think they are ENTITLED to all of the benefits that came their way. That University just sort of materialized (even private Universities get enormous tax deductions and incentives.)
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JEleazarian
Trad climber
Fresno CA
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Where is the payback?
Ken, I actually recognize and agree with that. It was one of the biggest arguments I had when I was a partner in a law firm. I believe that professions owe duties to society irrespective of payment. I had several partners who felt under no obligation to do anything for which they were not paid in full, and wanted no firm resources committed to helping those that could not pay unless the firm got substantial PR as a result. If for no other reason than to deal with people like some of my former partners, we need an income tax to pay for providing those minimum goods and services we deem essential to those who cannot afford them.
Every doc I know (and, for that matter, every med student I knew) worked terribly hard, and had lots of options available that would have given him or her much less stress and much more immediate gratification. Thus, to me, the doctor/dirtbag contrast was one where differing income and, likely, differing wealth, depended directly on the person's choices and actions.
Somewhere in my postings I must have given the impression that I have a philosophical opposition to income taxation, or to progressive income taxation. I have no such opposition -- at current rates. I don't resent paying taxes. I do so gladly, because I am grateful for all that the state, local and federal governments provided and continue to provide. When I started at Berkeley, a UC education was tuition-free. When I finished law school at UCLA ten years later, annual tuition was only $750.00 (it's now well north of $40,000 for law school). Even with my almost 50 years of paying taxes and my direct gifts to UCLA and Berkeley, I know I got a great deal and hope that I can help others get what I got.
I do have a personal problem requiring someone else to pay a higher rate than I, because that smacks of hypocrisy. Similarly, I have a personal problem requiring someone with substantially less income to pay at my rate.
With that aside, let's remember that the discussion was about the relative share (not absolute amount) of wealth. There, I would ask you a question: What constitutes a "just" distribution of wealth, and what constitutes a "just" change in that distribution? If we can agree on those definitions, we could be a long way toward a meaningful discussion about what to do with the current distribution of wealth.
As I mentioned in last night's post, I am up to my ears in work (paid and volunteer) for the next few days, so my breaks to participate here will be limited. Please don't take my silence as disinterest, hostility, or anything else other than the blessing of abundant, enjoyable, but currently rather insistent work.
John
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sempervirens
climber
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Ken M's comments are an excellent rationale for scrapping the socialism vs capitalism paradigm. (same goes for liberal vs. conservative, entitled class vs. the job creating wealthy). Those paradigms are inadequate models of the economy and society. Reality is more complex than that kind of naive thought.
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Gary
Social climber
Right outside of Delacroix
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Sorry for my slow response, Bill, but juggling three different jobs at the moment -- law, economics and classical music (in order of profitability --
John, you know very well music is very profitable. As long as you're not talking money.
...
First, as I noted much earlier upthread, I have no particular desire to redistribute wealth. Neither I nor my family are among the particularly wealthy by United States measure (though we certainly are by the world's), so I'm not being merely self-interested. I find it appalling that so many think the way to "fairness" is through what looks to me more like theft. Thrift serves a vital economic purpose. What right have we to punish it?
And I ask by what right do we have to punish honest and hard work? The Walton's become billionaires while the taxpayers have to subsidize their employees with medical care, child care, food stamps, etc. Who's the producer and who's the taker there?
...
I feel the same way about those who made an honest attempt at running a business, but didn't make it. A just society shows compassion.
Exactly right.
...
Nonetheless, for the sake of argument, let's assume that the country has decided that theft is moral and wants to redistribute wealth.
The country made that decision a long time ago. We despise hard work and only feel sloth and greed should be rewarded. Paper shuffling and financial system gaming is all that we value in this day and age.
Sorry to be so belligerent and rambling. If I were less tired, I'd be more succinct and conciliatory.
You are not belligerent at all.
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Ken M
Mountain climber
Los Angeles, Ca
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Kos, you talk about choice.
No doubt, there is a reason you made the choice not to study the differential calculus that John and I both had to take, and excel at, to enter our professions.
Is the work HARDER than the work a less gifted person might do, when they were not able to qualify for college, and worked instead, at a hard, manual labor job?
We, in the white collar workforce, almost never risk our lives or limbs in our occupations. It happens, but is rare, compared to the DAILY risks to simple laborers.
Where is the risk adjustment?
>Most of the above is true, but you seem to be suggesting that the doctor made no contribution whatsoever to their education. The major costs of becoming a doctor or other professional are not provided by the government.
They make a contribution, but the infrastructure is NOT something that they paid for, and the costs of that are enormous. Someone else paid.
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Elcapinyoazz
Social climber
Joshua Tree
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The major costs of becoming a doctor or other professional are not provided by the government
Incorrect. By FAR, the major "cost" of becoming a doctor or any other white collar professional is educating the person to a level that they are even prepared to attend a medical/business/grad school in the first place. Which happens, mostly, on the public dime in public schools.
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JEleazarian
Trad climber
Fresno CA
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Incorrect. By FAR, the major "cost" of becoming a doctor or any other white collar professional is educating the person to a level that they are even prepared to attend a medical/business/grad school in the first place. Which happens, mostly, on the public dime in public schools.
That is certainly a major cost, but hardly the only one. You're ignoring the cost to the professional-to-be in doing homework for 13 years to get into a good college, majoring in the right majors and getting superb grades to get into the right grad or profesisonal school, and foregoing all of the other opportunities that presnted themselves until they start a well-paying practice.
Also, I'm fairly certain that the K-12 cost to society to educate a future professional differs little from that to educate anyone else who graduates from high school. So why does the professional owe more to society? I think the real reason is simply that most professionals have been inculcated with that sense of duty in their training.
Re-reading the posts on this thread reiforces something I said on the Republicans thread: One of the major differences between liberal and conservative policies are that conservative policies are based on the idea that the economoic condition of people primarily depends on their choices. That of liberal policies are based on the idea that those with the most wealth accumulated it illegitimately, or else did so primiarly because of factors other than their own decisions.
John
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Norton
Social climber
the Wastelands
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That of liberal policies are based on the idea that those with the most wealth accumulated it illegitimately, or else did so primiarly because of factors other than their own decisions.
how non parisan!
how very condescending
how without merit, with nothing but your own personal opinion to back up that BS
and given your history how nauseatingly typical
just gotta always throw in some denigrating "liberal" crap don'tcha?
ignorant horse's ass
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JEleazarian
Trad climber
Fresno CA
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Ken, it seems to me that you're missing something vital in what people make. Our economic transactions are primarily voluntary. The "risk adjustment" for which you search is one of numerous calculations that individual actors process in deciding where to work.
If I don't like the risk of being a lumberjack (to select a rather risky job), I won't take the job, and will do what it takes to make sure I have a choice of a job I can tolerate.
I know physical labor quite well. I paid for my first climbing gear by harvesting fruit in 100 degree weather here. Because it was piece work, and I had done it enough to acquire some skill, I made a lot more than minimum wage, but it was still hard work for low pay. The reason is that it required very little to enter the workforce, so the supply was great. I didn't forget that lesson.
John
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rottingjohnny
Sport climber
mammoth lakes ca
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I think Lezarian is Armenian not French...? RJ
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Gary
Social climber
Right outside of Delacroix
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That of liberal policies are based on the idea that those with the most wealth accumulated it illegitimately,
John, I will defend the liberals here and say that is not true. It's the real left, not namby-pamby liberals, that say that.
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sempervirens
climber
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Its not that professionals, like a doctor or lawyer, owes a greater debt to society than other non-professionals, unskilled laborers, or lesser educated workers. It's simply important to recognize and admit that they also made use of the gov. services in order to get where they are. And that is all the more reason (IMO) to support the idea of gov. providing those services - education, libraries, student loans, certifications, a justice system, etc.
One could argue that these professionals are making greater contributions to society. They've become professionals,pay taxes (a higher rate if we had a progressive tax rate system). They have a greater chance to earn more, make innovations that benefit society, create business and jobs, spend more $ that might support our economy.
If the idealogical conservatives would have a look at this reality they'd see that their ideology makes no logical sense. They're fighting against their own ideal of how hard work leads to prosperity. If you cut all the gov. services that Tea Party hates are you promoting the development of more professionals who will work hard and get ahead. Or are you promoting more unskilled workers and low-paying jobs.
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sempervirens
climber
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That of liberal policies are based on the idea that those with the most wealth accumulated it illegitimately, or else did so primiarly because of factors other than their own decisions.
That's what you're told to think by the tea party, foxx news, Americans for prosperity, American heritage foundation...
Why not base your economic opinions on the economy rather than fear of liberal ideas. You're being played. As long as they can keep America all riled up emotionally about theft of your hard-earned money Americans won't see who is doing the stealing.
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sempervirens
climber
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If we don't "redistribute wealth" (theft some call it) we'll have less $ for these services. Sequestration,for example. Conservative ideology certainly does call for (and result in) cutting these services. "less gov. regulation". "gov. doesn't create jobs", "gov. is too big", "gov. is the problem". But it is gov. that provides the services I mention. And we can apply the same argument to other services: WIC, SSI, welfare, etc. All of these are often used as scapegoats for our current economic problems (debt). And then we have those who call funding these services "theft". Did I make the connection clear enough for you yet?
Of course, I believe we are redistibuting wealth, but not equitably or fairly or sensibly or sustainably.
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TGT
Social climber
So Cal
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Librairies,
Ben Franklin's was a private corp. A share of stock gave you the right to check out books.
Half of the public libraries in the US were originaly built by one man with his own money.
Andrew Carnegie.
About 1600 of them. ((2500 world wide)
http://en.wikipedia.org/wiki/Carnegie_library
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Elcapinyoazz
Social climber
Joshua Tree
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the idea that the economoic condition of people primarily depends on their choices.
I've heard of ten pounds of bullshit in a five pound sack, but this is really packing it in.
Why don't you go ask the millions of people forced into bankruptcy from medical bills that had nothing to do with their "choices" what they think of your theory?
Or maybe the hundreds of thousands who've had their pension funds raided/underfunded so CEO types can hollow out a company and siphon off the money for themselves while bankrupting the company and putting the pension obligations onto the taxpayer (at a fraction of what those retirees were promised).
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JEleazarian
Trad climber
Fresno CA
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I think Lezarian is Armenian not French...? RJ
RJ,
I was chuckling over the same thing (i.e. "parisan.") In truth, I was both non-partisan and non-French, which is why I chose "conservative" and "liberal" rather than "Democrat" or "Republican."
I think, too, that I must have stated my point poorly. I was trying to identify the underlying philosophy behind the differing policy prescriptions. I think both sides recognize, as Dave pointed out so well, that neither luck nor personal choices alone determine a person's financial conditions. Accordingly, both "sides" to the debate actually agree on a common core of principles, where we want to reward people for making good choices and simultaneously protect them from unfortunate circumstances.
The arguments really come at the margins. There, the more conservative will come down on the side of policies that give primary concern to rewarding good choices, and the liberal will come down on the side of policies that give primary concern to protection from unfortunate circumstances.
Oh, by the way, RJ is right; I'm Armenian. I do, however have Parisian first cousins, but primarily, the first cousins in France to which I am closest are Lyonnaise.
John
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JEleazarian
Trad climber
Fresno CA
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Why don't you go ask the millions of people forced into bankruptcy from medical bills that had nothing to do with their "choices" what they think of your theory?
I've represented over 1,000 individual consumer debtors in bankruptcy proceedings, El Cap. I did many of those cases for free (other than asking the client to pay the court filing fees), and almost all of them for far less than my normal hourly rate, so I think I know something about those who file for bankruptcy.
As I note above, I think there was a misunderstanding of just what "theory" I was putting forth, and the cause of that misunderstanding was my own wording of the proposition. Mea culpa.
That said, I can't say that I've ever encountered a debtor that wound up in bankruptcy solely because of bad luck, although the immediate cause of the bankruptcy is usually an event or events beyond the debtor's control.
The most common causes of consumer bankruptcy I've run across in order of frequency are:
1. Unanticipated loss of income, either from a layoff, unexpected pregnancy or a long-term illness that makes it impossible to work.
2. Divorce
3. Uninsured liabilities (including, but not limited to medical expenses)
With regard to cause (1), about the only bad choice most of the debtors made was one of his or her occupation. While, in theory, they could have purchased disability insurance, they certainly could not purchase insurance against the business failure of their employers. This category probably got the most pro bono work from me.
Cause (2) brings about insolvency because the couple, while married, made financial commitments that left no room for error. When they split, the extra cost of maintaining separate households exceeded their financial margin of error. I did several of these cases pro bono, as well, although the relation of this cause to pure bad luck is somewhat attenuated.
Cause (3) includes both uninsured medical expenses (there were sometimes large co-pays, but more often represented a total lack of medical coverage), automobile accidents where either liability exceeded policy limits, and the plaintiff was sufficiently vengeful to force the debtor to file, or else situations where there was no insurance coverage whatsoever. These cases represent a calculated risk on the part of the debtor. Those calculations went astray. This category probably contains the least element of bad luck.
In truth, I suspect that a great many middle class families are just one disability away from insolvency, but I personally think a great deal of the responsibility for that rests on our desire to want stuff now, and consequently to borrow up to our limits, and to forgo savings, insurance, and similar "rainy day" protections.
John
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