I agree, adaher, the days of taxation are almost done in North America. Yes, all taxation. Taxation is a form of extortion, and if we apply the morals we know for individuals to the state–as just another person–than taxation is unacceptable.
Where I differ is that I don’t think that’s good.
We’re not going to end all taxation, we’re just moving back to the equilibrium of the pre-New Deal era, when the income tax was meant to apply only to the rich and states mainly taxed the middle and lower classes, but lightly.
There was a relatively brief political moment from 1933-1979 where the middle class was willing to bear a high tax burden, but that moment passed and we’ve been slowly moving back to the pre-1933 situation since. We’ll never lose Social Security or the Great Society, but the promises of those programs will have to fit what we’re willing to pay for them going forward.
Well as long as everyone recognizes that it’s ridiculous to have anyone but the richest pay taxes at this time.
The economy is either in recession or coming out of a recession 50% of the time. If you can’t tax the middle class more than half the time, you can’t have a big social welfare state.
You have to choose: high middle class taxes and big social state, or low middle class taxes and small government. The third choice, low middle class taxes and big government with the deficit made up by borrowing, has already been played out. Thanks, Boomers.
And yet the situation is different than, say, 30 years ago. Again, there is a long term pattern of the escalating upwards transfer of wealth, not only from the poor and middle class but the lower upper class as well. And there’s a similar but not as aggressive pattern as regards incomes.
The situation isn’t that there is a long term pattern of wealth being pooled in the middle class and being taken away from the poor and upper class.
Incidentally, increased social spending would reduce some of the grosser effects of the growing inequality.
Dealing with wealth inequality by necessity means reducing wealth overall. You’ll find little taste for that in this country.
You cut middle class incomes by $10,000, but rich incomes by $200,000, while raising poor incomes by $3000, and call it a victory. At least if you’re Swedish. We have different standards of well being here.
You know what does raise all boats while reducing inequality? Fiscal responsibility, free trade, welfare reform. Those ingredients were present in the mid to late 90s and we need to get back to that.
Economies they say are not zero-sum systems but no it doesn’t necessarily mean reducing wealth overall. And the pattern of the escalating upwards transfer of wealth has been present for decades, so yes, someone’s gotta find the opposite distasteful.
But how long would those things take to stop the pattern of increasing wealth inequality and restore the wealth distribution to an earlier state? If the effect is negligible or not likely then the solution is insuperior.
And again you display a dislike of the government or certain aspects of it not decreasing in scope, to put it one way, but wealth inequality between the Beltway and the people is far, far less than wealth inequality between the people and the mega-rich, excluding members of the previous group.
It doesn’t necessarily mean reducing wealth overall, but man has not yet found a way to distribute wealth from those who have earned it to those who have not without decreasing overall economic activity.
It is false that such is some kind of long standing, never avoided problem, or that it has never happened ever, or in the entire history of this country, or in the past 10 years.
Again, there is a long term pattern of the escalating upwards transfer of wealth, not only from the poor and middle class but the lower upper class as well, and it is a problem, and a solution is not unacheivable.
It’s never been done. The only nation of reasonable size that comes close to us in median household income is Norway, and they have the distinction of being a non-corrupt oil exporter. Everyone else lags behind us badly. Compressing wealth inequality has by necessity meant reducing middle class incomes as well as wealthy incomes. It does however reduce poverty.
I’m not sure what solution could possibly work given the nature of the problem. The profitable industries just aren’t labor intensive anymore. There are billion dollar companies with 100 employees these days.
The redistribution of wealth need not lower overall economic activity.
And it’s more important that the problem be recognized.
It need not, but so far, it does. There are proven ways to lift all boats, but none of them involve redistribution. It’s all about economic growth and employment. Fiscal policy should serve the economy.
Here’s a story I found enlightening:
I didn’t start saving and investing particularly early, I just maintained this desire not to waste anything. So I got through my engineering degree debt-free — by working a lot and not owning a car — and worked pretty hard early on to move up a bit in the career, relocating from Canada to the United States, attracted by the higher salaries and lower cost of living.
Then my future wife and I moved in together and DIY-renovated a junky house into a nice one, kept old cars while our friends drove fancy ones, biked to work instead of driving, cooked at home and went out to restaurants less, and it all just added up to saving more than half of what we earned. We invested this surplus as we went, never inflating our already-luxurious lives, and eventually the passive income from stock dividends and a rental house was more than enough to pay for our needs (about $25,000 per year for our family of three, with a paid-off house and no other debt).
Our bread-and-butter living expenses are paid for by a single rental house we own, which generates about $25,000 per year after expenses. We also have stock index funds and 401(k) plans, which could boost that by about 50 percent without depleting principal if we ever needed it, but, so far, we can’t seem to spend more than $25,000 no matter how much we let loose. So the dividends just keep reinvesting.
Of course this guy is just lucky and he should be paying more taxes to help the unlucky ones who took on a lot of student debt and didn’t put off luxuries early in life.
I’m in a similar situation. I’m not nearly as awesome as this guy, but although my income has never exceeded the median, in wealth terms I’m in the top 10%. Taxing wealth means punishing good behavior and rewarding bad behavior. And you know what happens when you punish good behavior and reward bad? You get less economic growth.
Will ‘lifting all boats’ reverse and restore the escalating wealth inequality in the same or shorter a time than it took for it to be created?
A solution to this problem need not decrease overall economic activity. A solution to this problem need not have a significantly detrimental effect on the whole economy, and this is less likely than the former. A solution has not been implemented.
I’m sorry you identify more with those at the top and are less willing to consider direct solutions, but this doesn’t change anything of consequence.
I feel like taxing the rich is a much more tolerable thing to do than let the poor eat cake. +1
Lifting all boats is what we should want. If poverty decreased by half, but the rich doubled their wealth, that would be a victory, not a defeat.
A solution need not decrease economic activity. In theory, there are ways to reduce inequality and expand economic activity. And the first person to think of a way will probably join Paul Krugman as a Nobel Prize winner in economics.
If you can come up with a solution that doesn’t punish low and middle income savers who happen to hold a good amount of wealth, that would be great. And BTW, causing my investments to perform poorly is punishing me.
The only thing here that is definitive and negative regarding solutions to this problem we’re talking about, or something from which necessarily follows a negative effect, is you and working into everything you write the attitude that any attempt to correct the problem will have some negative and undesirable side-effect, along with the implication that overcoming these things is something like the greatest problem in the history of economics, none of which need be, or is, the case.
That is, if you need it spelled out, you’ve been making assumptions that highly narrow the field of solutions, and which only narrow it to solutions which you can suggest as having negative side-effects.
And again, I believe for the third time in the thread, the problem itself isn’t poverty. Poverty is a side-effect of the root problem, and then only for some people.
And also again, I’m sorry that your empathizing with the people at the top makes you unwilling to seek a direct solution, or a solution at all, but it’s ultimately just what the people would want.
And finally, no, it would not really be a solution if the rich doubled their wealth but poverty decreased by half. That would be the problem doubling itself combined with a small patch for the grossest effects of the problem. In any other context if someone were to suggest that be a solution I would tell them they were delusional. Or, in this case, excessively biased. However, if the rich doubled their wealth, but the poor and middle class did as well, this would be better than before, and most definitely better than what you suggested, but would be the status quo as far as the distribution of wealth inside the country.
Poverty is the problem. THe rich got a heck of a lot richer during the 90s, but poverty dropped, so most agreed that those were good times. Wealth inequality wasn’t really on the political radar. Wealth inequality only becomes a big political issue when times are tough and poverty is on the rise.
Semantics aside, and again:
I’m sorry that your empathizing with the people at the top makes you unwilling to seek a direct solution, or a solution at all, but it’s ultimately just what the people would want.
Finally, no, it would not really be a solution if the rich doubled their wealth but poverty decreased by half. That would be the problem doubling itself combined with a small patch for the grossest effects of the problem. In any other context if someone were to suggest that be a solution I would tell them they were delusional. Or, in this case, excessively biased. However, if the rich doubled their wealth, but the poor and middle class did as well, this would be better than before, and most definitely better than what you suggested, but would be the status quo as far as the distribution of wealth inside the country.
The distribution of wealth is related to the distribution of production. Technology enables the highly productive to be even more highly productive, without granting those same productivity gains to low skill workers. More often, technology simply replaces low skill workers. THus, wealth inequality increases.
that’s the problem. Redistributing wealth doesn’t fix the problem, it just treats one of the symptoms. You’d have better luck trying to redistribute loving parents, intelligence, height, or good looks.