How can people still dodge these facts? Just go “pull yourself up by your bootstraps”. How did something that is PHYSICALLY IMPOSSIBLE become some big catchphrase on the right???
Christophersays
n/t
nopoliticiansays
It’s easy to dodge these facts because people are generally insulated in their day-to-day lives from poor people.
Think about where you live. If you make $100k per year, do you know any families who are on food stamps? Does anyone living near you make minimum wage? Are your kids friends kids whose parents are on public assistance?
Sure, maybe you know someone who is unemployed, but I bet you think that they’re either just down on their luck, a slacker, or someone who went to school for the wrong thing and are thus at fault for their predicament.
Most well-off people are now unaffected by the plight of the poor.
danfromwalthamsays
We never should have taken our currency off the gold standard.
kbuschsays
DFW had difficulties reading graphs.
Q.E.D.
merrimackguysays
Not to mention all the high paid software developers, marketing execs etc.
There’s a lot at all the tech companies in MA at well.
Many low employee number people at Google, etc never have to work again.
Housing in Silicon Valley up 20% last year. Kids paying $3000/month to live in tiny SF apartments and ride the Google buses to work.
Don’t forget all those newly richie riches at tiny companies bought for a billion dollars.
There are many more- what about that guy that painted the murals for FB and got $100 million in stock options?
Technology created by these top earners is also responsible for destroying jobs across the country. Not just software but robots and automated equipment. Read a story today about “walking” gas drilling rigs where they move them around an area. Dramatically cut down the number of people required for drilling.
That’s where we should be pointing the finger. If all you can do is move your body to accomplish tasks you no longer have much value. If your brain does the same thing over and over, you’re also not going to be paid much. Not sure how government policy is going to change those facts.
SomervilleTomsays
I agree that all the things you cited caused a group of people to make more money. The problem is not how much money they made, the problem is that they kept almost all of it.
During that same period, the GOP mantra has been “free market” and “trickle down” — all this new-found wealth will somehow trickle down to everyone else. Ok, it will “grow the economy” (same difference). In fact, it did not. In my view, that demonstrates that the GOP dogma is pure horse manure.
I think that maintaining a high marginal rate on high-income taxpayers, maintaining a high rate on the capital gains tax (above some threshold), maintaining a high rate on the gift/estate tax (above some threshold) — in short, continuing the tax policy that Reagan and the GOP dismantled — would have solved the problem.
I think we pretty much agree on the symptoms. I suspect we profoundly disagree about the cure.
merrimackguysays
Maybe it’s because of all the campaign money he got in CA. Capital gains is where the big money is for tech types (as you know). No GOP involved.
My point in posting on this thread is that an income inequality chart goes up and the obvious conclusion is “the people at the top are getting richer, the bottom getting poorer, and the system (whatever that is) is to blame.” Mr Neer causally tosses Reagan in there but I can’t see how it’s his fault.
I am merely pointing out that the same system that created this disparity have produced a lot of stuff that people use/want/pay for and the people behind it profit beyond comprehension. Just like all the people will to spend hundreds of dollars for sports fund $10-30 million a year athletes who just happen to have some unique talents.
I think the solution IS higher taxes on the very rich, some sort of income floor, etc. The income inequality thing is a recipe for real trouble. I don’t think anyone has a simple answer, and getting to that answer does not start with rich people bashing (but if we are, let’s make certain we start with the real rich, which include Paige, Brin, Zuckerberg, et al.
SomervilleTomsays
I am disappointed by Mr. Obama’s refusal to raise the capital gains tax.
The income disparity is very real, that’s no artifact of politics are charting. People with high incomes are getting even larger increases, and people on the bottom with low incomes are losing even more.
The fact that that reality is unaddressed by federal tax policy IS a failure of “the system”. It is Reagan’s fault because Reagan was the first president since the gilded era to assert “trickle down” as legitimate economic policy. He gave it different name, of course — “supply side economics” — but the policy is the same and the results were the same. Who else BUT Ronald Reagan should be held responsible for inventing “supply side economics”?
The GOP has asserted that lie as fact and dogma since St. Reagan held office. That’s another fact.
I don’t know if the answers I offer are “simple” or not. I know that that GINI coefficient for America has become much larger than for our first-world European allies — all of whom use the kind of tax mechanisms I sketched to address the problem.
I think it is important to again distinguish between income and wealth. We have been talking about income inequality. Even more dangerous is the corresponding increase in wealth inequality. An unprepared lottery winner with a $500,000/yr income and $600,000/yr in debt service is still broke.
Finally, I have not done any “rich people bashing”. I love rich people, I would love to become one. I am eager to pay the increased taxes I described, because I view them as hallmarks of my prosperity.
danfromwalthamsays
We need to have a tax on intangible assets like stocks and bonds after the first 100K. You want to wait until the asset is sold, my idea would have them paying a little something until the asset is sold
SomervilleTomsays
Oh, that’s a FINE idea. Because if you’re going to tax those intangible assets before they’re sold, you MUST also allow losses to be claimed when the decline in value. Are you sure that’s what you mean?
Scott Brown would LOVE this.
doublemansays
Those types of people you cite still remain a very small percentage of the population, including the very wealthy population (except in the Bay Area).
Pay of top executives has gone up across almost all industries, and notably in banking in finance.
That said, there are a lot of “d-bags” in tech and MA is increasingly becoming a place for the libertarian-ish “disruption” mindset that has taken over Silicon Valley. Also, we’re so obviously in a tech bubble and there may be some real hurt coming.
merrimackguysays
The CEO of my MA company makes $1.5 million.
That is nothing in Silicon Valley. #5 guy at Google made $5.7M last year, but made $75.0M for the prior two years.
Look at this a-hole!! The Google masseuse is a retired multi-millionaire. Tell me she deserves it for rubbing all those backs.
From the same article, and this is 2007. Probably triple that number now.
Although no one keeps an official count of Google millionaires, it is estimated that 1,000 people each have more than $5 million worth of Google shares from stock grants and stock options.
jconwaysays
Because Obama is a Democrat, and most Silicon Valley types are Democratic donors, the rest of us grassroots Democrats shouldn’t want higher taxes on the rich?
You are committing the DFW fallacy by ascribing policy goals and concerns of the BMG community to the day to day corrupt practices of the corporate wing of the Democratic Party.
Many of us have stood outside that wing for quite some time, many of us are just as disappointed in the Obama presidency as we were in the Clinton presidency, and I don’t see how proving ‘these Democrats are hypocrites’ somehow ennobles the Republicans who are quite openly disdainful of the working class and have not even the slightest pretension of caring about income inequality.
It’s one thing to critique Obama for his closeness to various CEOs, as John Oliver wonderfully did over the weekend in his FCC/Net Neutrality segment, or as many more serious left wing outlets routinely. It’s quite another to argue that hypocrisy of one group of people and their failure to implement just policies somehow invalidates the need for more just economic policies in the first place.
merrimackguysays
First you criticize me for not segmenting Democrats (which is funny on a board where I think 99.9 % would vote any D over any R) then you make a sweeping generalization about all Republicans.
I am only pointing out that if the leader of your party doesn’t think it’s a good idea, then maybe the followers should follow. As you know there are no leaders on this side, so we’re allowed more diversity. If you think the President’s corrupt, I guess you are allowed to think that.
It seems instead that denying the problem even exists is preferable on that side than finding solutions. I have yet to hear any proposed on that side of the aisle. I’d love to hear some.
merrimackguysays
Why don’t you look it up? You don’t even want to support the Democrat position (“not my faction, sorry”) and then you want me to detail this and somehow defend dozens of ideas (you might recall the R’s don’t run the government, so there is no one policy). We started out talking about a graph and now you’re changing the subject. Typically this means that the thread is at an end.
SomervilleTomsays
You began this aspect of the conversation. It sounds to me as though you are unhappy with the result.
You are the one who accused jconway of being “the biggest generalizer on this board” — then you get touchy when he makes the obvious and perfectly reasonable response.
You made an unsubstantiated claim. The GOP since Reagan has made its dogma about income and wealth inequality as central to its identity as the Christian stance towards the virgin birth and the literal resurrection. No Democrat forced the GOP to adopt that stance or strategy.
The data is in and the results are clear (if predicted).
We started talked about a graph — of income inequality. We are still discussing income inequality and its causes. You offered a failed explanation, and now you get prickly when called on it.
Do your own googling — preferably before, rather than after, making such inflammatory comments (as your last one).
merrimackguysays
I’m not unhappy with the result.
No one can connect income inequality directly to Reagan. I’m not defending him or his policies. I’m just saying that the rise in technology, along with the corresponding rise in the number of ultra rich tech titans, could be just as much to blame, as could a number of other factors.
Everyone knows technology jobs pay better than other industries and it could be just as much to blame. Ditto for jobs that require using your brain,
I take issue with jconway because he distances himself from Democrats he doesn’t like and then expect me to detail Republican plans, of which there are many and I’m sure many that could be picked apart.
I don’t there’s a simple answer because I haven’t even heard the cause.
As I mentioned earlier, why tax and redistribute? Why not just control the economy comrade?
SomervilleTomsays
The reason our tax system was progressive (meaning that wealthy people paid a larger share of their wealth than the rest of us) from the FDR era until the Reagan era was that extreme income inequality of the Gilded Era and the run-up to the Great Depression nearly wrecked the nation. Any number of economists have illuminated the specifics of that reality.
So, in fact, your assertion is that “no one can connect income inequality directly to Reagan” is, in my view, incorrect on its face. Here’s just one example (emphasis mine):
The income gap in the United States has widened over the last three decades do to failed economic polices primary placed by Republican presidents. It started in 1980 when Ronald Reagan cut the top tax rate from 70% down to 28% by the time he left office after the 1988 election. The idea of supply side economics, otherwise known as “trickle down” or “Reaganomics,” is that by giving the wealthy tax breaks, the money at the top will “trickle down” to the workers at the bottom. After three decades of this ideology, it has been proven false time and time again.
Not to be overly pedantic, but “Robert Sobel” (whoever that is) made the connection. So “no one can” is incorrect.
I get that you apparently don’t like do your own googling, but seriously — this information IS widely available and, correct or not, the connection IS made quite frequently.
Instead of speculating about what “could be”, please consider this point made by another commentator on the web — free markets don’t cause inflection points. Generally, when there is a well-defined inflection point on a graph like we’re looking at here, it means that an external force — usually government policy — changed.
Technology jobs existed for decades before the election of Mr. Reagan, as did jobs that “require using your brain”. I therefore suggest that neither of those explains the inflection point plainly visible in the graph — and plainly coincident with the election of Ronald Reagan.
Unless you want to argue that Ronald Reagan was elected because of the sudden upsurge of income inequality (that might be interesting), then in this case the correlation is likely to also imply some form of causation.
fenway49says
The tech point you raise is a good one and the effects of technological change are just starting to be felt. But we’re talking about a pretty small number of people compared to the population at large. A bigger change in our economy since the late 70s, one very much connected to Reagan and his ideological heirs (among whom I count Bill Clinton on this point) is the explosion of finance, and in particular complex and risky finance.
We used to have a financial sector that was regulated and relatively boring, providing liquidity where needed. It was fairly small as a percentage of the economy. Since the late 1970s we have a runaway financial sector that has gotten pretty much all the wealth gains not going to tech titans, and in the process has made our economy much more subject to crashes. The financial shell game has become an end to itself, providing virtually no benefit to the real economy. Dodd-Frank barely touched the riskier “products” that threaten us all with a do-over of 2008.
SomervilleTomsays
She invested literal sweat equity and her investment paid off. Why does that make her an “a-hole”, for crying out loud?
I’m happy for her. I just think she should pay SIGNIFICANTLY higher taxes on her wealth.
doublemansays
That’s one company and there are only a handful of others on par in the tech world. I don’t understand the obsession with Google.
Take a look at exec compensation at firms like Goldman Sachs. Or energy companies. Or hedge funds. Or private equity. Or smaller financial firms like MA’s own Affiliated Manager’s Group at which Kerry Healey’s husband pulls in ~$20M a year. There’s many more multi multimillionaires coming out of places like that than places like Google.
jconwaysays
That said, there are a lot of “d-bags” in tech and MA is increasingly becoming a place for the libertarian-ish “disruption” mindset that has taken over Silicon Valle
And sadly this is an insight that is woefully understated around here. But I have watched as ‘those d-bags’ have basically wrecked the city I grew up in and accelerated it’s inevitable march to San Francisco/Brooklyn-ification. As it is there is a vast gap between the immigrant and minority communities that generally live in public housing serving the ‘creative class’ that gets to enjoy the smug cultural cache Cambridge has to offer without any real investment in it’s past or future as a community where people of all classes can live. It will have a profoundly bad effect when that tech bubble does burst, and the reliable middle class families that made up it’s property base have all put up stake for cheaper pastures. I don’t think that community is alone in MA either.
lodgersays
When you say they basically wrecked the city you grew up in, what exactly do you mean? Gentrification? Fixing up older properties and changing them to owner occupied? Replacing worn out with new? IF that’s what you mean – we disagree on what is the definition of “wreck”.
kbuschsays
It is the top 1% of the income distribution that has done particularly well during this period. The “high paid software developers and marketing execs” occupy the top quintile in income certainly but not in the top percent.
Curiously, the top quintile without the top 1% has not made gains during this period.
nopoliticiansays
Government policy can definitely change those facts. Our economy is largely focused on efficiencies, as you describe above. Everyone has had to “do more with less” for decades.
It wasn’t always like that. People used to have secretaries instead of doing their own stuff. Companies used to have groundskeepers to pick up the trash that now lays everywhere. Grocery stores used to have people to retrieve the grocery carts.
The difference is the unbridled pursuit of profit, the relentless competition. This is something that is driven by government policy, namely removing what used to be an effective cap on earnings – a 95% upper tax rate. If you were faced with the choice of earning $30,000 more in profit, but paying $27,000 of that in taxes, or hiring someone to pick up the trash, I think you might just hire the person. But when you can take home $16,000 of that $30,000, you’d rather take the cash.
Capitalism is ruthless, people will let people die for money (see: GM and its faulty ignition switch). It needs to be governed, and since Reagan, the economic policy has been to refuse to govern it.
merrimackguysays
All of which have been stated before. Mine is to cap charitable donations. No giving $10 million to a private university and getting your name on the building.
But if I can summarize … so you can make the money but then we’ll tax it and redistribute it to people further down the socio economic spectrum. Why not just take more control of the private sector? Mandate hiring and wages. Restrict executive pay. Reduce competition. All those actions would work. I made good money in the 70s in the regulated trucking industry (Teamster, summer job) I didn’t even have to do a good job.
kbuschsays
is really not such a good idea. I’m certainly a liberal in favor of a strong regulatory regime, but mandating hiring and wages begins to encroach on exactly the territory the free market is fairly good at.
I suspect there are three things wrong. First, corporate governance has gotten completely out of control, and that is reflected in out-sized CEO income. Second, the strongly redistributive taxes that started to get phased out in the 1980s had a keenly beneficial effect on the economy. Finally, the erosion of labor unions has tilted the labor market quite a bit against labor.
The Reagan Administration was part of all three: the era of mergers began with it and with the growth of large finance. Tax policy was rolled back. Labor unions were targeted. Bad all round.
roarkarchitectsays
In 1986 there were a lot of tax law changes – before 1986 – almost all corporations filed and paid taxes at the “Corporate Level” after 1986 for small (and this means I think less than 20 stockholders) this income instead flowed directly to individuals tax returns. Income – means increases in assets in these corporation – so as the economy expands and businesses invest – assets appear as income on individuals tax returns. This probably is the reason for the aggregate increase shown in the charts. Corporate executive and Entertainers income is a different story.
SomervilleTomsays
I fear you are conflating two independent factors.
Pass-through corporations were created to recognize that many corporations (small and large) exist as “lifestyle” companies. They were a Republican contribution. The changes made in 1982 (I think that’s the date you meant) were driven by the GOP in order to avoid the “double taxation” bogeyman.
It doesn’t matter how you slice and dice it, the chart is real. If the change from C- to S- status affected enough people to affect the chart, then what you are seeing is the who benefited and who paid from the reduction in corporate income taxes that resulted.
The bottom line remains that the GOP cut taxes, cut taxes primarily on high-income taxpayers, and as a result high-income taxpayers have benefited disproportionately.
The rest is just hand-waving.
roarkarchitectsays
The tax revenue law of 1986 – made a lot more companies elect sub chapter “S” status. The majority of small and mid-size companies are S-Corps – I would not call the majority of small and medium corporations – lifestyle companies. Profit flows directly to taxpayers with S-corporations – this is different from income – so a business with expanding assets – passes tax-liabilities to individuals and not necessarily income.
merrimackguysays
this is an opinion based discussion.
SomervilleTomsays
S-corporation profits are passed through to the share-holders as INCOME. That’s why they are called “pass through” entities. That revenue is reported on the K-1 form distributed by the entity to each shareholder each year, and the K-1 revenue is reported on page 1 &8212; the “gross income” page — of that shareholders federal 1040.
I fear the last part of your last sentence is more egregiously mistaken. Even if an S-Corp retains income in its bank accounts, that income is nevertheless reported on its K1s and its shareholders pay taxes on that. A check written to an S-Corp with a single shareholder is NO DIFFERENT from a check written personally to that shareholder — the income (for tax purposes) is equivalent.
The benefit is that if a C-corp had the same profits, it would pay a corporate income tax on those profits. Any dividends paid to shareholders (which is how a C-Corp distributes income to shareholders) would then be taxed again at individual income tax rates by each shareholder.
There is no legal way to NOT pass S-corp income to its shareholders. The same is true, now, for LLCs and LLPs — the latter have significantly easier tax filings.
I’ve been doing this since 1992, I have some first-hand experience.
roarkarchitectsays
We are arguing the same thing – The income tax liability passes through on the K1 – this does not mean that the S-Corporation has made a distribution to the stockholders of that amount.
If you are an owner of a S-corp – stock you at least hope the distribution pays the taxes – if you are in a business – which I’m in that requires capital assets – it’s not always the case.
How can people still dodge these facts? Just go “pull yourself up by your bootstraps”. How did something that is PHYSICALLY IMPOSSIBLE become some big catchphrase on the right???
n/t
It’s easy to dodge these facts because people are generally insulated in their day-to-day lives from poor people.
Think about where you live. If you make $100k per year, do you know any families who are on food stamps? Does anyone living near you make minimum wage? Are your kids friends kids whose parents are on public assistance?
Sure, maybe you know someone who is unemployed, but I bet you think that they’re either just down on their luck, a slacker, or someone who went to school for the wrong thing and are thus at fault for their predicament.
Most well-off people are now unaffected by the plight of the poor.
We never should have taken our currency off the gold standard.
DFW had difficulties reading graphs.
Q.E.D.
Not to mention all the high paid software developers, marketing execs etc.
There’s a lot at all the tech companies in MA at well.
Many low employee number people at Google, etc never have to work again.
Housing in Silicon Valley up 20% last year. Kids paying $3000/month to live in tiny SF apartments and ride the Google buses to work.
Don’t forget all those newly richie riches at tiny companies bought for a billion dollars.
There are many more- what about that guy that painted the murals for FB and got $100 million in stock options?
Technology created by these top earners is also responsible for destroying jobs across the country. Not just software but robots and automated equipment. Read a story today about “walking” gas drilling rigs where they move them around an area. Dramatically cut down the number of people required for drilling.
That’s where we should be pointing the finger. If all you can do is move your body to accomplish tasks you no longer have much value. If your brain does the same thing over and over, you’re also not going to be paid much. Not sure how government policy is going to change those facts.
I agree that all the things you cited caused a group of people to make more money. The problem is not how much money they made, the problem is that they kept almost all of it.
During that same period, the GOP mantra has been “free market” and “trickle down” — all this new-found wealth will somehow trickle down to everyone else. Ok, it will “grow the economy” (same difference). In fact, it did not. In my view, that demonstrates that the GOP dogma is pure horse manure.
I think that maintaining a high marginal rate on high-income taxpayers, maintaining a high rate on the capital gains tax (above some threshold), maintaining a high rate on the gift/estate tax (above some threshold) — in short, continuing the tax policy that Reagan and the GOP dismantled — would have solved the problem.
I think we pretty much agree on the symptoms. I suspect we profoundly disagree about the cure.
Maybe it’s because of all the campaign money he got in CA. Capital gains is where the big money is for tech types (as you know). No GOP involved.
My point in posting on this thread is that an income inequality chart goes up and the obvious conclusion is “the people at the top are getting richer, the bottom getting poorer, and the system (whatever that is) is to blame.” Mr Neer causally tosses Reagan in there but I can’t see how it’s his fault.
I am merely pointing out that the same system that created this disparity have produced a lot of stuff that people use/want/pay for and the people behind it profit beyond comprehension. Just like all the people will to spend hundreds of dollars for sports fund $10-30 million a year athletes who just happen to have some unique talents.
I think the solution IS higher taxes on the very rich, some sort of income floor, etc. The income inequality thing is a recipe for real trouble. I don’t think anyone has a simple answer, and getting to that answer does not start with rich people bashing (but if we are, let’s make certain we start with the real rich, which include Paige, Brin, Zuckerberg, et al.
I am disappointed by Mr. Obama’s refusal to raise the capital gains tax.
The income disparity is very real, that’s no artifact of politics are charting. People with high incomes are getting even larger increases, and people on the bottom with low incomes are losing even more.
The fact that that reality is unaddressed by federal tax policy IS a failure of “the system”. It is Reagan’s fault because Reagan was the first president since the gilded era to assert “trickle down” as legitimate economic policy. He gave it different name, of course — “supply side economics” — but the policy is the same and the results were the same. Who else BUT Ronald Reagan should be held responsible for inventing “supply side economics”?
The GOP has asserted that lie as fact and dogma since St. Reagan held office. That’s another fact.
I don’t know if the answers I offer are “simple” or not. I know that that GINI coefficient for America has become much larger than for our first-world European allies — all of whom use the kind of tax mechanisms I sketched to address the problem.
I think it is important to again distinguish between income and wealth. We have been talking about income inequality. Even more dangerous is the corresponding increase in wealth inequality. An unprepared lottery winner with a $500,000/yr income and $600,000/yr in debt service is still broke.
Finally, I have not done any “rich people bashing”. I love rich people, I would love to become one. I am eager to pay the increased taxes I described, because I view them as hallmarks of my prosperity.
We need to have a tax on intangible assets like stocks and bonds after the first 100K. You want to wait until the asset is sold, my idea would have them paying a little something until the asset is sold
Oh, that’s a FINE idea. Because if you’re going to tax those intangible assets before they’re sold, you MUST also allow losses to be claimed when the decline in value. Are you sure that’s what you mean?
Scott Brown would LOVE this.
Those types of people you cite still remain a very small percentage of the population, including the very wealthy population (except in the Bay Area).
Pay of top executives has gone up across almost all industries, and notably in banking in finance.
That said, there are a lot of “d-bags” in tech and MA is increasingly becoming a place for the libertarian-ish “disruption” mindset that has taken over Silicon Valley. Also, we’re so obviously in a tech bubble and there may be some real hurt coming.
The CEO of my MA company makes $1.5 million.
That is nothing in Silicon Valley. #5 guy at Google made $5.7M last year, but made $75.0M for the prior two years.
Look at this a-hole!! The Google masseuse is a retired multi-millionaire. Tell me she deserves it for rubbing all those backs.
http://www.nytimes.com/2007/11/12/technology/12google.html?pagewanted=all&_r=0
From the same article, and this is 2007. Probably triple that number now.
Because Obama is a Democrat, and most Silicon Valley types are Democratic donors, the rest of us grassroots Democrats shouldn’t want higher taxes on the rich?
You are committing the DFW fallacy by ascribing policy goals and concerns of the BMG community to the day to day corrupt practices of the corporate wing of the Democratic Party.
Many of us have stood outside that wing for quite some time, many of us are just as disappointed in the Obama presidency as we were in the Clinton presidency, and I don’t see how proving ‘these Democrats are hypocrites’ somehow ennobles the Republicans who are quite openly disdainful of the working class and have not even the slightest pretension of caring about income inequality.
It’s one thing to critique Obama for his closeness to various CEOs, as John Oliver wonderfully did over the weekend in his FCC/Net Neutrality segment, or as many more serious left wing outlets routinely. It’s quite another to argue that hypocrisy of one group of people and their failure to implement just policies somehow invalidates the need for more just economic policies in the first place.
First you criticize me for not segmenting Democrats (which is funny on a board where I think 99.9 % would vote any D over any R) then you make a sweeping generalization about all Republicans.
I am only pointing out that if the leader of your party doesn’t think it’s a good idea, then maybe the followers should follow. As you know there are no leaders on this side, so we’re allowed more diversity. If you think the President’s corrupt, I guess you are allowed to think that.
because they may choose to wear them as a badge of honor, e.g. I am the stupidest and most obnoxious person on BMG.
Or climate change? Or lack of health insurance?
It seems instead that denying the problem even exists is preferable on that side than finding solutions. I have yet to hear any proposed on that side of the aisle. I’d love to hear some.
Why don’t you look it up? You don’t even want to support the Democrat position (“not my faction, sorry”) and then you want me to detail this and somehow defend dozens of ideas (you might recall the R’s don’t run the government, so there is no one policy). We started out talking about a graph and now you’re changing the subject. Typically this means that the thread is at an end.
You began this aspect of the conversation. It sounds to me as though you are unhappy with the result.
You are the one who accused jconway of being “the biggest generalizer on this board” — then you get touchy when he makes the obvious and perfectly reasonable response.
You made an unsubstantiated claim. The GOP since Reagan has made its dogma about income and wealth inequality as central to its identity as the Christian stance towards the virgin birth and the literal resurrection. No Democrat forced the GOP to adopt that stance or strategy.
The data is in and the results are clear (if predicted).
We started talked about a graph — of income inequality. We are still discussing income inequality and its causes. You offered a failed explanation, and now you get prickly when called on it.
Do your own googling — preferably before, rather than after, making such inflammatory comments (as your last one).
I’m not unhappy with the result.
No one can connect income inequality directly to Reagan. I’m not defending him or his policies. I’m just saying that the rise in technology, along with the corresponding rise in the number of ultra rich tech titans, could be just as much to blame, as could a number of other factors.
Everyone knows technology jobs pay better than other industries and it could be just as much to blame. Ditto for jobs that require using your brain,
I take issue with jconway because he distances himself from Democrats he doesn’t like and then expect me to detail Republican plans, of which there are many and I’m sure many that could be picked apart.
I don’t there’s a simple answer because I haven’t even heard the cause.
As I mentioned earlier, why tax and redistribute? Why not just control the economy comrade?
The reason our tax system was progressive (meaning that wealthy people paid a larger share of their wealth than the rest of us) from the FDR era until the Reagan era was that extreme income inequality of the Gilded Era and the run-up to the Great Depression nearly wrecked the nation. Any number of economists have illuminated the specifics of that reality.
So, in fact, your assertion is that “no one can connect income inequality directly to Reagan” is, in my view, incorrect on its face. Here’s just one example (emphasis mine):
Not to be overly pedantic, but “Robert Sobel” (whoever that is) made the connection. So “no one can” is incorrect.
I get that you apparently don’t like do your own googling, but seriously — this information IS widely available and, correct or not, the connection IS made quite frequently.
Instead of speculating about what “could be”, please consider this point made by another commentator on the web — free markets don’t cause inflection points. Generally, when there is a well-defined inflection point on a graph like we’re looking at here, it means that an external force — usually government policy — changed.
Technology jobs existed for decades before the election of Mr. Reagan, as did jobs that “require using your brain”. I therefore suggest that neither of those explains the inflection point plainly visible in the graph — and plainly coincident with the election of Ronald Reagan.
Unless you want to argue that Ronald Reagan was elected because of the sudden upsurge of income inequality (that might be interesting), then in this case the correlation is likely to also imply some form of causation.
The tech point you raise is a good one and the effects of technological change are just starting to be felt. But we’re talking about a pretty small number of people compared to the population at large. A bigger change in our economy since the late 70s, one very much connected to Reagan and his ideological heirs (among whom I count Bill Clinton on this point) is the explosion of finance, and in particular complex and risky finance.
We used to have a financial sector that was regulated and relatively boring, providing liquidity where needed. It was fairly small as a percentage of the economy. Since the late 1970s we have a runaway financial sector that has gotten pretty much all the wealth gains not going to tech titans, and in the process has made our economy much more subject to crashes. The financial shell game has become an end to itself, providing virtually no benefit to the real economy. Dodd-Frank barely touched the riskier “products” that threaten us all with a do-over of 2008.
She invested literal sweat equity and her investment paid off. Why does that make her an “a-hole”, for crying out loud?
I’m happy for her. I just think she should pay SIGNIFICANTLY higher taxes on her wealth.
That’s one company and there are only a handful of others on par in the tech world. I don’t understand the obsession with Google.
Take a look at exec compensation at firms like Goldman Sachs. Or energy companies. Or hedge funds. Or private equity. Or smaller financial firms like MA’s own Affiliated Manager’s Group at which Kerry Healey’s husband pulls in ~$20M a year. There’s many more multi multimillionaires coming out of places like that than places like Google.
And sadly this is an insight that is woefully understated around here. But I have watched as ‘those d-bags’ have basically wrecked the city I grew up in and accelerated it’s inevitable march to San Francisco/Brooklyn-ification. As it is there is a vast gap between the immigrant and minority communities that generally live in public housing serving the ‘creative class’ that gets to enjoy the smug cultural cache Cambridge has to offer without any real investment in it’s past or future as a community where people of all classes can live. It will have a profoundly bad effect when that tech bubble does burst, and the reliable middle class families that made up it’s property base have all put up stake for cheaper pastures. I don’t think that community is alone in MA either.
When you say they basically wrecked the city you grew up in, what exactly do you mean? Gentrification? Fixing up older properties and changing them to owner occupied? Replacing worn out with new?
IF that’s what you mean – we disagree on what is the definition of “wreck”.
It is the top 1% of the income distribution that has done particularly well during this period. The “high paid software developers and marketing execs” occupy the top quintile in income certainly but not in the top percent.
Curiously, the top quintile without the top 1% has not made gains during this period.
Government policy can definitely change those facts. Our economy is largely focused on efficiencies, as you describe above. Everyone has had to “do more with less” for decades.
It wasn’t always like that. People used to have secretaries instead of doing their own stuff. Companies used to have groundskeepers to pick up the trash that now lays everywhere. Grocery stores used to have people to retrieve the grocery carts.
The difference is the unbridled pursuit of profit, the relentless competition. This is something that is driven by government policy, namely removing what used to be an effective cap on earnings – a 95% upper tax rate. If you were faced with the choice of earning $30,000 more in profit, but paying $27,000 of that in taxes, or hiring someone to pick up the trash, I think you might just hire the person. But when you can take home $16,000 of that $30,000, you’d rather take the cash.
Capitalism is ruthless, people will let people die for money (see: GM and its faulty ignition switch). It needs to be governed, and since Reagan, the economic policy has been to refuse to govern it.
All of which have been stated before. Mine is to cap charitable donations. No giving $10 million to a private university and getting your name on the building.
But if I can summarize … so you can make the money but then we’ll tax it and redistribute it to people further down the socio economic spectrum. Why not just take more control of the private sector? Mandate hiring and wages. Restrict executive pay. Reduce competition. All those actions would work. I made good money in the 70s in the regulated trucking industry (Teamster, summer job) I didn’t even have to do a good job.
is really not such a good idea. I’m certainly a liberal in favor of a strong regulatory regime, but mandating hiring and wages begins to encroach on exactly the territory the free market is fairly good at.
I suspect there are three things wrong. First, corporate governance has gotten completely out of control, and that is reflected in out-sized CEO income. Second, the strongly redistributive taxes that started to get phased out in the 1980s had a keenly beneficial effect on the economy. Finally, the erosion of labor unions has tilted the labor market quite a bit against labor.
The Reagan Administration was part of all three: the era of mergers began with it and with the growth of large finance. Tax policy was rolled back. Labor unions were targeted. Bad all round.
In 1986 there were a lot of tax law changes – before 1986 – almost all corporations filed and paid taxes at the “Corporate Level” after 1986 for small (and this means I think less than 20 stockholders) this income instead flowed directly to individuals tax returns. Income – means increases in assets in these corporation – so as the economy expands and businesses invest – assets appear as income on individuals tax returns. This probably is the reason for the aggregate increase shown in the charts. Corporate executive and Entertainers income is a different story.
I fear you are conflating two independent factors.
Pass-through corporations were created to recognize that many corporations (small and large) exist as “lifestyle” companies. They were a Republican contribution. The changes made in 1982 (I think that’s the date you meant) were driven by the GOP in order to avoid the “double taxation” bogeyman.
It doesn’t matter how you slice and dice it, the chart is real. If the change from C- to S- status affected enough people to affect the chart, then what you are seeing is the who benefited and who paid from the reduction in corporate income taxes that resulted.
The bottom line remains that the GOP cut taxes, cut taxes primarily on high-income taxpayers, and as a result high-income taxpayers have benefited disproportionately.
The rest is just hand-waving.
The tax revenue law of 1986 – made a lot more companies elect sub chapter “S” status. The majority of small and mid-size companies are S-Corps – I would not call the majority of small and medium corporations – lifestyle companies. Profit flows directly to taxpayers with S-corporations – this is different from income – so a business with expanding assets – passes tax-liabilities to individuals and not necessarily income.
this is an opinion based discussion.
S-corporation profits are passed through to the share-holders as INCOME. That’s why they are called “pass through” entities. That revenue is reported on the K-1 form distributed by the entity to each shareholder each year, and the K-1 revenue is reported on page 1 &8212; the “gross income” page — of that shareholders federal 1040.
I fear the last part of your last sentence is more egregiously mistaken. Even if an S-Corp retains income in its bank accounts, that income is nevertheless reported on its K1s and its shareholders pay taxes on that. A check written to an S-Corp with a single shareholder is NO DIFFERENT from a check written personally to that shareholder — the income (for tax purposes) is equivalent.
The benefit is that if a C-corp had the same profits, it would pay a corporate income tax on those profits. Any dividends paid to shareholders (which is how a C-Corp distributes income to shareholders) would then be taxed again at individual income tax rates by each shareholder.
There is no legal way to NOT pass S-corp income to its shareholders. The same is true, now, for LLCs and LLPs — the latter have significantly easier tax filings.
I’ve been doing this since 1992, I have some first-hand experience.
We are arguing the same thing – The income tax liability passes through on the K1 – this does not mean that the S-Corporation has made a distribution to the stockholders of that amount.
If you are an owner of a S-corp – stock you at least hope the distribution pays the taxes – if you are in a business – which I’m in that requires capital assets – it’s not always the case.
This article basically says the data is unclear.
http://www.thefiscaltimes.com/Articles/2014/05/04/What-Piketty-Left-Out-His-Inequality-Argument – I just picked on something that I’m personally familiar with. Tax policy is just about exciting as mud 🙂