Don’t forget that when that money was earned, the rich earner paid a combined state and federal income tax of 40% - 50%, depending on the state. So, of every dollar Ms. Bigbucks earned, she can leave only 25 cents to her heirs.
OTOH when I was young, the top federal income tax bracket was 90%, so it was once worse. (Thank you, JFK.)
This statement sounds like an Irish Bull or Yogi Berra. However, it could be interpreted to mean:
*An effective way to fight poverty would be to modify the way the poor live (e.g., getting married, finishing high school, deferring parenthood.) *
If one believes that the poor cause poverty, then it follows that the poor could stop causing it, or at least, they could cause less of it.
So, in other words-all they have to do is stop being poor!
That’s brilliant, why didn’t I think of that!
:rolleyes:
Unfortunately, you brought up the word “confiscatory” in regards to “vindictive tax policies against the rich.” The rich are not the only ones to whom the estate tax applies, so your point is invalid. Indeed, much of the debate regarding the so-called “death tax” has centered on its effect on middle-class small business owners.
What’s more, the marginal rate for the estate tax is nigh-unto irrelevant in a discussion of “confiscatory taxation” for rich people, since most rich people make their money off a combination of earned income, for which the top marginal rate is 39.6%, paid by less than 1% of taxpayers; and investment income, which is taxed at, what, 28%? On a year-to-year basis, the estate tax plays little or no role, since it is a one-time charge.
Kimstu–I can’t argue with your analysis. I was thinking more on a very surface, purely numbers level. Your statements of course are true at the deeper structural levels.
Unfortunately, you brought up the word “confiscatory” in regards to “vindictive tax policies against the rich.” The rich are not the only ones to whom the estate tax applies, so your point is invalid. Indeed, much of the debate regarding the so-called “death tax” has centered on its effect on middle-class small business owners.
And the preclude your inevitable objection that, since the top marginal rate is likely to apply only to the rich (or the soon-to-be-rich), therefore justifying your claim of “vindictiveness,” consider this the mirror image of your argument with Esprix, et al., on another thread. The fact that the rich might be disproportionately affected by the estate tax rates does not suggest that they are the target of vindictive tax rates; just as you suggest that the fact that gay students might be disproportionately affected by a policy against bringing same-sex dates doesn’t mean that the policy is intended to harm gay students.
What’s more, the marginal rate for the estate tax is nigh-unto irrelevant in a discussion of “confiscatory taxation” for rich people, since most rich people make their money off a combination of earned income, for which the top marginal rate is 39.6%, paid by less than 1% of taxpayers; and investment income, which is taxed at, what, 28%? On a year-to-year basis, the estate tax plays little or no role, since it is a one-time charge.
Kimstu–I can’t argue with your analysis. I was thinking more on a very surface, purely numbers level. Your statements of course are true at the deeper structural levels.
Very well put!
And I agree with Demosthesian – high school is harder then work!
The poverty rate in the nation took a big jump when the gas crunch hit in the 70s and later, when the market bottomed out in the 80s. Now add to the mix the simple fact that, in the 70s, Jimmy Carter slashed the mental health budget which forced many mental institutions to dump thousands of people once institutionalized, out onto the streets if they could minimally care for themselves. (This, by the way, was the beginning of the Crazy Homeless surge that increased even further when out patient programs lost much of their budgets.)
Then, somehow, companies decided that they could increase the price of their stock in the market, and many stupid Americans agreed, by slashing hundreds of thousands of jobs, closing down plants and restructuring. Where prosperity once meant expansion, it now meant dumping millions on the unemployment lines. The banks added to it all by foreclosing readily on homes these folks owned, instead of being patient and giving them a chance to recover.
That was further exerbated (SP) by some genius discovering that people with too much money could buy up old, repossessed homes, work on them and sell them at a profit. The banks, finding cash in this, readily continued to foreclose homes even faster and ads ran on TV about the opportunities of buying up previously owned homes.
The end result is a major amount of poor people living either on the streets or in crappy neighborhoods of high crime and cheap rent. The sharp increase in gas prices has not helped any, for that affects the power bills and the amount of usage the car gets for looking for or going to work. Naturally, the more expensive cars, newer versions, get the better gas mileage while the poor traditionally drive older gas hawgs that are in need of repair, which is too costly for them to afford.
Toss in the sharp increase of minimum wage service jobs, with few benefits, the sharp increase in health and home insurance, restricted working hours, higher profits by businesses, and increasing food costs and you have a major problem on your hands.
I know many people without health insurance because (A) their job offers limited, very expensive plans, (B) their jobs do not offer plans, © even a minimal plan is hideously expensive or (D) the HMO is too restrictive, limited and insufficient for their needs. There are people now going without home owners insurance because, as of a couple of years ago, the insurance companies decided that if you have a $50,000 house, insured for $50,000 that you really need to be insured for $75 to $100,000 and pay double premiums. You cannot get, in an increasing area, $50,000 worth of insurance for your $50,000 house. They offer you one option if you cannot afford the increase: no coverage. Great for them, but bad for the millions of minimum wage and below poor.
So, all of this contributes to poverty. There is a great line between the haves and the have-nots and programs for the poor are getting restricted. In my city, a program that will help the poor by paying a power bill or back rent ran out of funds less than a quarter of the way into their fiscal year. They had gotten less in their budget. The local power company will not work with the poor if their power is cut off for nonpayment. They have to not only pay the back due bill, but come up with another security deposit!!
Interestingly enough, if the poor live in the house with no power, trying to save up the needed funds, eventually the city will throw them out as living without power is considered a health hazard. I have never figured out how the city figures that living out in the open, in one’s car, without water or shelter from the elements is actually better than living in 4 walls and a roof without power.
Again that contributes to the poor.
My city actively discourages large poor homeless tent cities and even goes to the extent of tearing down abandoned houses or buildings that they might squat in, trying to get some cover from the elements. In actuality, most are gradually forced out of town, to move on to become someone else’s problem.
Locally, we had a hiring boom, what with new businesses and all, but then there were more workers than jobs and the business attitude became ‘do as I say or get out’ and a lot of workers found themselves working long hours for little pay and no compensation or benefits. The favorite thing to do is to work a person hard for 39 hours a week, that way the company does not have to offer them anything in the way of perks or benefits. Working off the clock is fashionable if one wants to keep the job or get a promotion. No over time.
That contributed to the local poverty level.
So, I would say that in the majority of the cases, the poor are not responsible for their poverty but in reality trapped in a system that needs overhauling.
is a man that inheirets $10 million to blame for being rich?
we almost invariably measure poverty by income and don’t talk about net worth. having kids too soon does cause problems, especially for the kids. i would say partially correct but oversimplified.
the private ownership of land could be regarded as a form of slavery since some people must pay other people to live on land they did not create. how did they get the land?
Dal Timgar
It only applies to people leaving more than $600,000, and does not reach 55% until $3,000,000. I think that it is safe to say that it is confiscatory only for the rich.
That hardly means that that is the most important aspect of it.
This is a vindictive policy. It disproportionately affects the rich. Those are separate points, both valid. I don’t believe I have ever said that one rests entirely on the other.
Whether it is vindictive, whether it is confiscatory, and whether it is effective are three entirely different issues. If you insist on drawing comparisons between this and Marc’s case, what if I had responded to that thread saying that the prom constitutes less than .4% of the entire year, and so the school’s policies with respect to it were not important?
Well, actually, much (perhaps most?) of the estate tax falls on unrealized capital gains which have not been previously taxed.
To be honest, I don’t consider a 55% marginal rate above some God-awful high amount of wealth to be confiscatory. Bill Gates can still leave tens of billions of dollars to his heirs. That you (The Ryan) call confiscatory?
Well, this is kind of true, but only for political reasons. I.e., the small business owners (and farmers) served as the “poster children” but they were never really what the debate was about. They make up only a small part of the revenues from the estate tax and the Republicans turned down an opportunity to even take care most of these cases because they wanted to keep their “poster children” that they could use to eliminate a tax that does, by and large, affect mainly the very wealthy. [See http://www.responsiblewealth.org/tax_fairness/Estate_Tax/Estate_Tax_Background.html ]
By the way, an interesting point of fact regarding Gates and Buffet…Both of them (well, Gates’ father anyway), to their credit, were among those who opposed the elimination of the estate tax. They don’t see it as vindictive at all. They see it as an important way for those that can most afford it to contribute back to the society that they benefitted so handsomely from, and as a way to avoid an aristocracy of wealth. [See, e.g., http://www.pgtoday.com/PGT/Articles/reflections_on_the_estate_tax_gates_interview.htm and http://www.ariannaonline.com/columns/files/021901.html ]
pld: The focus on “the gap between rich and poor” is, to me, one of the most misplaced priorities of too many liberals. The size of the gap doesn’t matter–what matters is whether those on the bottom end of the scale are able to achieve a decent standard of living with what they earn.
A couple other points to add to kimstu’s points: Whether you like it or not, people tend to judge their standard of living not on an absolute scale but on a relative scale. You can tell some poor folks that they ought to be happy they have running water and heat, which after all, rich people didn’t have a few hundred years ago. I just don’t think you will get very far.
And, the second point is that there is some good reasons to feel this way: (1) Some goods such as decent housing in safe neighborhoods with decent schools can easily get priced out of someone’s reach because of wealth distribution. (2) There is a feeling that everyone should benefit from the fruits of a wealthy society. Those who get insanely wealthy do so in a society that has set up certain ground rules that they have taken very successful advantage of. I.e., society has already made lots of implicit decisions about what sort of wealth distribution we are going to have long before we embark on what we call “redistributive” policies. This fact alone justifies paying attention to the distribution of wealth…Not paying attention to it is akin to promoting a very unequal distribution because the instabilities toward the accumulation of wealth in a modern capitalistic society are large.
I agree with jshore; although there may be an absolute growth in wealth that benefits the poor as well as the wealthy (which is the best justification for some inequality; as economics isn’t a zero sum game and it permits everybody to benefit) there is a definite normative value in western society that says that overwhelming inequality on a societal level is immoral. If that’s the case, then it doesn’t matter if a tax is “confiscatory” or not; perhaps redistributative taxes are precisely what is necessary and desirable in this situation. If you don’t agree, that’s an expression of your own values; while valid they do not necessarily override the values of society as a whole.
The rich, and their fans, do not get to dictate a society’s values to it. The fact that they usually do is an example of what Kimstu was talking about; the wealthy gain an utterly disproportionate amount of control over the media and public discourse. As economically efficient as media concentration can sometimes be, it plays merry hell with the availability of effective tools for political and social speech.
(Even the Internet hasn’t really changed that. Sure, people can debate here, but how effective is it, really? Nobody in power ever pays attention to discussion boards, and only rarely does email even register as a blip on the radar.)
By the way, a point on the zero-sum argument that always seems to come up: While it is true that things are not zero-sum, there are usually (or even always) trade-offs on the margin. Thus, if I were a parent with two kids and I gave one of them 2 M&Ms and the other 100 M&Ms, when the one with 2 M&Ms complained, I could correctly point out that he is much better off than if I had given him no M&Ms. However, this begs the question of a policy change that would give them more equal numbers of M&Ms.
jshore
It’s interesting that you use the term “God-awful”. Do you really think that there is something evil about money?
Yes. If you have a hundred dollars, and I steal $55 from you, the fact that I left you with $45 doesn’t mean that I didn’t rob you.
If you’re talking about inflation, that’s another issue entirely. Furthermore, there’s a certain amount of decent housing. The number of millionaires really isn’t going to change that amount (it might increase it, but it’s certainly not going to decrease it). Absent inflation, the idea that increased wealth can decrease the amount of affordable housing doesn’t make sense.
That’s just begging the question.
Could you explain what, exactly, you mean by that? “Society” is a methaphorical concept. Literally speaking, “society” is a nonsentient entity incapable of making any decisions, implicit or explicit. [Dear God, I’m starting to sound like Lib]
Promotion and toleration are two completely different things.
I don’t think you’re quite clear on the meaning of the term “begs the question”.
Demosthenesian
Yes, but there’s also an opposite value in Western society (those that are poor are poor because they’re lazy and immoral). Society isn’t very good at making up its mind, and really isn’t the best source of sound conclusions.
Is what society wants automatically necessary and desirable?
And if you do agree, that’s also an expression of your own values.
This is not an issue of the rich dictating values to society, but the reverse.
“Excuse me, I’m here to steal your money.”
“I don’t think that’s quite right.”
“What?!? Who are you to dictate what my values should be?”
Surprising. Based on your beliefs about the poor, I’d have guessed that you think most crime is caused by crime victims.
One of the questions in the OP raises a good point. Poor people aren’t necessairly to blame for their poverty, but the fact that they live in poverty keeps them impovrished. People across the board have the same basic needs; food, clothing and shelter. While the chioces available in each of these categories can have a vast range in terms of quality, price, availability, etc., the needs are the same. Now when an individual living below the poverty level prepares a meal, they’re effectively spending a higher percentage of their income on food than a wealthy individual. And the lower the income, the higher the percentage spent on meeting basic needs.
I’m not saying that poverty begets poverty, but if an individual doesn’t have the necessary skills, for whatever reason, to improve their income, then it can be a bit of a vicious cycle.
that’s my $0.02
Well, by this standard, any tax rate is confiscatory. And, I have heard people say that “taxation is theft” but I think that is pretty silly. People couldn’t amass the sort of wealth they do in our society if they lived isolated from everyone else; and, likewise they couldn’t (at least by means that everyone would agree is stealing) if we had an anarchistic society. Our society is way too interactive to say that any money you earn is automatically and a priori yours. These decisions are rightfully a part of the society in which you earned the money.
As for the estate tax in particular, I have pointed out before that it is very deceiving to look at the issue only from the point-of-view of the deceased who is, after all, dead and rotting. From the point of view of the living heirs, it is hard to justify how they are entitled to any of the money if we really believe in equality of opportunity. What did they do besides have the good fortune to be born into a wealthy family? I think you arrive at the current estate tax by taking a compromise point-of-view, i.e., keeping incentives for people to earn lots of money by allowing them to pass it on to their heirs but also allowing society at large to get a “cut” of it in order to maintain some assemblance of opportunity for the less-well-off.
Well, yes, one of the points is that the wages of median and low wage workers generally haven’t kept up with inflation over the last 30 years or so. But, inflation is also an imperfect measure. Housing prices, particularly in certain regions, have risen faster than inflation. I have a hard time believing that the price of housing in say the entire silicon valley region isn’t influenced by the high incomes of many in that region.
Starting to? Anyway, my point here is that all sorts of decisions we make to have a capitalistic society with corporate law and patent law the way it is, etc., etc. are decisions that are going to effect the distribution of wealth that we have.
I fail to really see that much of a distinction. In the end, they both give you the same result. The only difference is that policies that benefit the rich are generally sold as being great for all whereas those that benefit the poor are pidgeonholed as helping (or maybe not helping the poor) while costing the rest of us.
My point is that one has failed to consider anything in between the policies of “noone gets any M&Ms” and “one child gets two and the other gets 100”. To me, this seems unfair to the child getting only 2 even if he is better off than if he had gotten none. Is that clear enough for you?
I don’t think that Demos would disagree. His/her point is, as I understand it, that society has the perfect right to make decisions about “redistribution” of wealth. Because of your values you can argue one way and we can argue another. Libertarians try to circumvent this process by claiming a priori that there is a fundamental right here that is being violated and thus that society does not have the right to make such decisions. [Of course, they are perfectly happy with all the decisions that lead to the very unequal wealth distribution to begin with.]
And we would argue that you are very naive about how the world works and the power that the rich have over political discourse in our society. Your view of the rich as victims would, I believe, rightly not find very many adherents.
I also note again that Buffett and William Gates Senior would also disagree with you.
Wow, some good posts by Kimstu and Omnivore !
Re taxes and attitudes toward the rich. IMO, now and in the past, non-rich Americans often favor any new tax if it’s presented as a “soak the rich” scheme. But, the richer you are, the more power and influence you can bring to bear to get whatever you may want. The result? We keep creating new taxes and fiddling with existing ones with the intent of making the rich pay more. And the rich keep coming up with new ways to pay less: new loopholes, new writeoffs, tweeking this, adjusting that. I think the rich are winning. Whatever the tax laws seem to say, somehow the rich wind being less heavily hit by then the middle class. When the interests of the rich and the interests of the middle class are in conflict, the rich are not likely to lose.
Re inheriting $$$. Here’s a thought experiment. Imagine rich couple. Not very rich. Just barely rich. They live in an upscale suburb, their son attends very good public schools. The summer following their son’s graduation from high school, disaster stikes. The family business has been laundering drug money. Or whatever. The parents are awaiting trial. The house, cars, etc. have been seized by the cops. The boy is on his own, penniless, at 18. He has his H.S. diploma, the clothes on his back, and not much else
Is he in the same boat as an 18 year old from a poor inner city family who finds himself on his own, penniless, at 18, with an H.S. diploma, the clothes on his back, and not much else? I would say, no.
The former rich kid has connections. Chances are, he’ll turn to the one or another of the sucessful businessmen who are the fathers of his friends. It’s a good bet that one of them will give him a better job then the poor kid has any chance of getting.
Okay, let’s say this avenue is closed to him. He’s falsely believed to be a child molester or something. Say he goes to a distant city where no one knows him, and seeks employment. Is he now in the same boat as the kid from the poor family? Again, no. On paper, they’re educationally equal, but the former rich kid attended way better schools; he’s got a good education, and the poor kid does not. Also, just by having grown up where he did, the former rich kids speaks in an educated manner. The poor kid does not.
The former rich kid, dispite having interited zilch, does have major advantages over the poor kid. He’s a good bet to get a much better job, and wind up on a much higher rung of the socio-economic ladder then the poor kid.
There’s an old joke about a graduation speaker who gets an idea for a topic, as he enters the back of the auditorium through a door marked “Push.” He pontificates about how students need ambition, hard work and persistance in order to reach success. He ends the speech by dramatically pointing to the sign on the door, which sums up success in one word. Of course, the sign on the inside of the door says, “Pull.”
Despite the joke, I think push is more important than pull. I know many people, including my father and uncle, who achieved considerable success, starting from nowhere at all.
OTOH even people with pull also need push. E.g., my wife used to work with Jim Hewlett, son of Hewlett-Packard founder Bill Hewlett. Jim was a bright, capable guy, but he had no everweening ambition. He was content to be working as a computer programmer.
Yes, December, but compare Bill and Bob, who are roughly equal in intelligence, have a roughly equal amt. of ambition, are about equal in their willingness to work hard.
If Bob comes from inner city poverty and Bill comes from the suburban middle class, Bill has a big advantage over Bob, and is quite likely to do better. To have a big advantage, Bill does not actually need to come from wealth. Being middle class gives him an enormous advantage over Bob. To find a case where a Bob outdid a Bill, you would usually need to compare an ambitious, hard working Bob with a laid back, content-with-little Bill.
The disparity beteen the Bobs and the Bills is probably greater in the US then it is in most of the other developed nations. In the other developed nations, Bob would not attend schools that would need upgrading to qualify as 2nd rate. Bob would still be at a disadvantage, but not as much of one.