Wealth Distribution

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Dave Kos

Social climber
Temecula
Apr 2, 2013 - 03:24pm PT
I just want to know by what means you make money go from one group to another in our democratic, rule of law system? I don't think you answered that, or I need a bigger fan to get through the smokescreen.

Start with a simple example.

Who is the richest man in America?

Did he start in that group?

If not, how did he move from one group to another?

Gary

Social climber
Right outside of Delacroix
Apr 2, 2013 - 06:44pm PT
BBA, it's called being a thief. Dave points out that many thieves don't start out as top dog, but that does not change their status. They are leeches that suck the blood of the producers, plain and simple.
TGT

Social climber
So Cal
Apr 2, 2013 - 06:46pm PT
At about 8-9 min the origin of this thinking is explained, but you really should watch the whole thing.

BBA

climber
OF
Apr 2, 2013 - 07:30pm PT
I'm not looking for an answer that says some are thieves or how things got this way. People who think my proposition is correct should hold their peace. Let's hear someone who has written passionately that tax change is bad to tell what the alternative is. Consider it a thought experiment.

What is your a simple answer to this: How do you redistribute wealth in the U.S. if not by changing the tax code to bring it back to a more progressive mode?

Credit: BBA


Dr. F.

Big Wall climber
SoCal
Apr 2, 2013 - 07:36pm PT
Good points BBA, yes we need a progressive tax system to adjust the wealth despartiy, which is corrosive to our nations health

Republicans have created our huge debt and given the rich free wealth with their policies and blocked the Dems from fixing the situation,
and then have the gall to complain about how the Gov. is broke, pure hypocrisy

John E just likes to muddy the waters with the what ifs, slippery slopes and other discredited BS

There is no convincing him that he is wrong, he will cherry pick through the gates of hell to make a point that will satisfy him alone.

But he is The Only Right winger that can make a point, the others will just accuse you of wanting communism.

rottingjohnny

Sport climber
mammoth lakes ca
Apr 2, 2013 - 07:40pm PT
BBA...We could start re-distributing wealth by having a judicial system that enforces long standing law in a more equitable manner...Petty thief steals TV and gets 1 year in the hooska...Enron steals billions and the perpatrators might have to do time in a country club prison while the victims lose their life savings...? ...Is anything more perverted than our judicial system...?
Dropline

Mountain climber
Somewhere Up There
Apr 2, 2013 - 07:52pm PT
I'm looking for something clear and simple. The terms used and the the reality that exists are clear enough. I just want to know by what means you make money go from one group to another in our democratic, rule of law system?

Read The Millionaire Next Door

BBA

climber
OF
Apr 2, 2013 - 09:16pm PT
Oh well. I didn't want to hear people agreeing with me or coming up with tiny solutions like convicting the Enron crooks. I know the answer to my question - unless some god or gods really exist and miraculously do the redistribution. You never know now that the Pope is kissing the feet of the poor, unless it's just another priestly fetish.

I suppose one could posit no growing wealth distribution problem, but even the Economist and the WSJ says there is one.

If John's statement is the best the right can offer, they have nada. I vote for Dr. F's opinion(s) and gracefully retire from this thread.
Gary

Social climber
Right outside of Delacroix
Apr 2, 2013 - 09:20pm PT
How do you redistribute wealth in the U.S.

The correct question is how do you STOP redistribution of wealth in this country.
Dave Kos

Social climber
Temecula
Apr 2, 2013 - 09:44pm PT
How do you redistribute wealth in the U.S. if not by changing the tax code to bring it back to a more progressive mode?

You are asking the wrong question.

It's not about redistributing existing wealth.

It's about how to create more wealth while distributing the new wealth equitably.

rottingjohnny

Sport climber
mammoth lakes ca
Apr 2, 2013 - 10:05pm PT
How do you stop trickle- up economics or in construction lingo , wicking....?
JEleazarian

Trad climber
Fresno CA
Apr 2, 2013 - 11:28pm PT
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
Dr. F.

Big Wall climber
SoCal
Apr 3, 2013 - 08:29am PT
Trickle up economics, the Conservative Promise

and they will do it by confusing you with complex theories of how we will all get rich soon, so you should be glad it's like this, because when you strike it rich-you will get your just reward
sempervirens

climber
Apr 3, 2013 - 08:38am PT
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.
Ken M

Mountain climber
Los Angeles, Ca
Apr 3, 2013 - 09:39am PT
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.)
JEleazarian

Trad climber
Fresno CA
Apr 3, 2013 - 11:12am PT
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
sempervirens

climber
Apr 3, 2013 - 11:18am PT
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.
Gary

Social climber
Right outside of Delacroix
Apr 3, 2013 - 11:54am PT
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.
Dave Kos

Social climber
Temecula
Apr 3, 2013 - 12:12pm PT
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.

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. (For example loans need to be paid back. The carrying cost that the government provides is a very small part of the total cost.)

But all this doesn't address JE's core point: The doctor and the dirtbag had a choice: One chose to climb, the other chose to work toward a skill the provides a benefit to both themselves and to society.

Many of you seem to be advocating a society where individual choices do not matter.

I'm no doctor, but I make a similar choice almost every day. There are five days a week that I don't climb so that I can have medical insurance today and savings that will pay for it later when I'm not able to work. When someone - especially an older person - does not have medical insurance or other basic needs, I am sympathetic to their situation but I do wonder if perhaps their situation is a result of them making different choices.
Ken M

Mountain climber
Los Angeles, Ca
Apr 3, 2013 - 02:36pm PT
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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