Senate Income Inequality in the U.S.: Causes, Effects, Solutions

So your only answer to the failure of the War on Poverty is to double down on the failed War on Poverty.

It's not about the division of the pie for a fair chunk of Red America: For a lot of them, it is about either their individual liberty, which they are not willing to sell for any price, or they are not thinking in terms relating to their share of the pie, but instead viewing the continued level of spending as immorally bankrupting future generations as the basis for their support of the tea party.

So, that is a complete non-starter, Jabba. Try again.

KK is right: We can have individual liberty, or we can have a more "socially just" distribution of outcomes/results. We cannot have both.

 

Honestly, I have a hard time seeing how it would be less. First of all, if you consider x to be the amount of money currently being spent on health care by businesses, going to government provided health care that adds more people seems like it will, by necessity, need greater than x dollars to cover more people. Which means those that ARE putting money in will have to put the same amount or more. Beyond which, a business will try to find the cheapest way to provide care, which keeps costs down (arguments about quality can come in there, I grant), whereas I don't see that pressure in government if we're talking single payer (something like Germany, different beast).

Be honest with this. What you're really calling for here is that food costs should rise. You're not talking about cheap healthy food, but about making cheap food pricey. Beyond which, nutritious food is never going to be as easy to prepare as unhealthy food. Fresh food takes more time than something that could've been prepared weeks ago, loaded with preservatives, and frozen. Although, I do also cast great doubt onto the idea that simply 'healthy food' is much more expensive if you remove the time element.



On more general points, I think the focus on education is necessary. IMO, I view it as the ultimate key. Provide people with a solid education, and you can eradicate racism, sexism, other prejudices, and economic disadvantage as practical effects. I think education should be supported, both from the sneering disdain of those that want to defund it, and the sneering disdain from teachers unions and other groups on the political left that view education as either a guaranteed paycheck or a political pawn. In California a few years ago, there was, as there is every year, delays in getting the budget done, to the point that cuts would be made until there was a budget. The Republicans pushed for a bill that would fund schools but leave the rest of the budget up for debate so that schools wouldn't be harmed, and the teachers' union and the Democrats opposed it, because when you make sure it's the schools that aren't funded well, you can tug at the emotional heartstrings of voters who want their kids to have a good education and prioritise that. The teachers' unions here have also made it so that it's nearly impossible to get fired in many areas, and part of the trouble is that the teachers involved with the unions tend not to be the good teachers, but the ones that wanted a stable job and can't really teach. Hence, the unions put the brakes on anything that would reward good teachers or expose bad teachers. A teacher should be (and must be) considered an immensely important person to our society not because of their title, but because of what they actually do. However, at least locally, there are a great many that think they should be rewarded because of the title alone.

 

I hate people who have a lot of money and then complain when they're asked to fork over a paltry amount in taxes.

 

I will simply repeat what I said: Taking the marginal tax rate higher is going to be seen as a non-starter among Red America.

If the only argument you have is tax increases, then I have to wonder just what utility there is in continuing this discussion.

 

Basically, what I'm hearing here is "I disagree with tax rate increases on a philosophical level, so even if they were good for the country, I will oppose them." Which isn't to say that they are good for the country, just that the position you're staking out indicates to me that even if it could be absolutely proven beyond a shadow of a doubt that they were good for the country, you'd still oppose them along philosophical grounds.

Of course, it goes both ways. Even if use of the death penalty resulted in lower crime rates, I'd still oppose it. Even if torturing suspected terrorists resulted in a safer country, I'd still oppose it. Even if running a nation as a theocracy meant for a more happy and stable nation, I'd still oppose it. Even if making homosexuality illegal meant that society would be happier, safer, healthier and longer lived, I'd still oppose it. I can understand rejecting a policy outright along philosophical lines, even if adoption of the policy would make the country stronger overall.

 

And yet, despite the fact that business expenses are a tax credit, the pundits seem to think income tax rates have any effect on business.

Much of it is the mistaken belief that the minute you go above $8350, all your money gets taxed at 15% instead of 10%; at $33950, at 25%; and so on, but the really important one is at $372950, where it goes up from 33% to 35%. In reality, the earlier money is grandfathered in at the lower rate, so (to use a mathematically simple example) if you made $9350, you would have to pay $850+15%*$1000, or $1000.

And the estate tax is a tax on money you really didn't earn. I mean, God, inheritance is a tontine, when you think about it.

Not surprisingly, a lot of the myths about tax come from two factions I'll refer to as Figures, Inc. and Grassroots, Inc. Figures, Inc. is a group that can make any spreadsheet say exactly what you want it to. Thus you get ideas about poor people paying the AMT, or farmers getting hit with the inheritance tax. Grassroots, Inc. is responsible for...Well, let's just say, ceci n'est pas un pipe. More like a plumber.

 

I am new to this particular thread, so I thought I'd give a general summary of my reactions to both the topic and the posted debate. I apologize if I repeat anything previously mentioned.

Equality as a General Principle

Equality is the favored child of liberalism, the foundational pillar worthy of a triumphal march. However, classical liberalism did not advocate for ubiquitous equality. Rather, it advocated 'equality in liberty'. Governments would subject every man (and woman) to an equal level and type of coercive force. Societies would no longer contain parallel legal standards, dependent on class, wealth and/or race. [The latter was added afterwards.] The 14th Amendment encapsulates this very principle when it demands that all citizens enjoy "equal protection of the law." That does not mean that class or wealth disparities cease to exist, but simply that these disparities do not affect the inherent value of an individual's life and liberty. The radicalism of the American Revolution was not the elimination of class inequalities, but the elimination of class as a justification for unequal treatment under the law. Now, you can argue whether the Revolution or even the aftereffects of the Civil War and Civil Rights Era accomplished these lofty goals - many do - but you cannot deny that 'equality in liberty' represents the foundational premise of American liberalism.

Equality as Applied to Wealth

While I am ardent champion and believer of 'equality in liberty,' I am hesitant to expand the principle of equality to wealth, income, or any other social cause. I understand the appeal, but nonetheless fear that the pursuit of these causes will in fact impair, if not prevent, the original objective that is liberty. In this argument, I refer to Alexis de Tocqueville who first postulated that equality and liberty were not complementary values but were in opposition. He theorized that equality and liberty are in fact inversely proportional; as one increases, the other decreases. In his own words, "...there exists also in the human heart a depraved taste for equality, which compels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." I've always viewed this as particularly astute. Redistribution tastes like forced servitude. You work, not for your own benefit, but for another. It penalizes you for your liberty and imposes a restraint on the boons of your labor.

I might also add, although this does not apply to everyone, that there have been several comments on this thread tinged with bitterness (perhaps even hatred) and not a genuine, philanthropic desire to provide. It is a phenomena that, in my mind, strengthens his point.

The Reality of Income Inequality

I do not deny that income inequality exists. I do, however, question its breadth and repercussions. Americans are repeatedly told that the gap between the rich and poor widens each year, but data shows that this allegation does not accurately reflect the state of working America. Prosperity gains of the last few decades have been shared by workers of all income levels albeit at different rates. Moreover, the allegation does account for the progress made by individual households. For instance, the Economic Policy Institute in its annual report "The State of Working America" reported that in real dollars the bottom fifth of households earned an average of only $200 a year more in 2005 than they did in 1979. At first glance, that is an awful statistic. The comparison, however, tells us nothing about how individual households fared over time. According to researchers at the University of Michigan, households in the bottom fifth in 1975 earned an average of almost $28,000 more per year by 1991. According to U.S. Treasury data, a whopping 86 percent of households in the bottom fifth in 1979 had climbed out of poverty by 1988. That is a far more palatable than the picture crafted by the Economic Policy Institute.

The fact is that individual households move up and out of pove

 

It's not an allegation. It's a fact. And it's plenty accurate, objectively measured and expressed by techniques such as the Gini coefficient.

It's those "different rates" that either increase or decrease income equality, by definition. Median household incomes have stagnated. The economic growth of the Bush years benefited the wealthiest Americans to the near exclusion of everyone else, with the problem growing worse throughout the decade.

You've painted a compelling picture of American life...a generation ago.

The 1970s and into the early 80s were perhaps the high water mark of upward mobility, but that picture worsened as the effects of the Reagan Revolution and backsliding on affirmative action became more pronounced.

Not really. As income inequality increased throughout the 1980s, and took off again in the 2000s, the disparity itself, combined with undermining some of the social support that helped provide people at the bottom with a foundation for upward mobility, has made the prospect of upward mobility more arduous, and more out of reach for many.

 

Sorry for the late response, the discussion has really taken off! Hopefully this isn't repeating too many points that other people have already made.

I think we should all pay for it. If every American was guaranteed access to the following: quality healthcare, nutritious food, clean water, nice clothes, sturdy shelter (with piping and temperature control), impressive public transportation/education/libraries/childcare; then isn't that enough for every Senior Citizen, Disabled Person, and Poor/Unemployed/Homeless to live off of? It leaves them wanting more, which could be supplemented by their own savings and charities, and if it's just a poor person then it motivates them to look for work. But that seems enough to get by on. If you agree with that, then couldn't we just get rid of Social Security, Medicare, and Medicaid? Income taxes would rise (or some other tax), but payroll taxes would be eliminated.

As for some class resentment, I don't see it. The truth is that ANYONE, including me and you, could someday face unemployment and poverty. Anyone in the country could someday be in that very difficult and vulnerable position. So why not offer everyone peace of mind, that even if the worse

 

That still doesn't really answer the question of "who pays for it?"

Part of the problem is that currently, almost half of everyone who files income tax returns doesn't pay any income tax. The bottom 50% of filers pay less than 3% of the total tax burden, while making over 12% of the AGI. (source) That covers everyone who makes $33,048 or less.

Do you consider them part of "I think we should all pay for it." or not?

Kimball Kinnison

 

Again, all those problems will be solved by improving the distribution of income. Raise the top marginal rates on the nation's wealthy and improve social services at the bottom and eventually the total tax burden will become more evenly distributed across income levels.

 

Yes, I think everyone should pay for it. Not sure which tax is best for this, and if it's income then I'm not sure how much each bracket should pay, but I do think our tax system (as well as our bureaucracy and legal code) should be simplified and streamlined.

To repeat my original point, I'm just saying that if all those things were guaranteed (quality healthcare, nutritious food, clean water, nice clothes, sturdy shelter (with piping and temperature control), impressive public transportation/education/libraries/childcare), then we wouldn't need to worry about income equality in the United States. Providing access to a better social safety net is better than the alternative of just redistributing the wealth directly and giving money to the poor, in my opinion.

Personally, if you had to choose between the two, would you rather have the system I'm proposing (keeping in mind it would probably replace Social Security, Medicare, Medicaid, Welfare/Unemployment Benefits, & HUD/HHS), or the system we have?

 

Some of the problems here are that we don't have enough money to just tax the budget into balance at current levels of spending.

Take, for example, the recent federal budget. In the budget that Obama proposed last year, it included a $1.267 trillion deficit. Currently, Bill Gates has a net worth of approximately $56 billion (the second wealthiest man in the world), and that's not his annual income, but his net worth. Even if you were to confiscate the net worth of everyone over $10 million, it wouldn't serve to close that deficit for just one year. There just isn't enough money.

And all of that is just on the federal level. Individual states are facing similar shortfalls. How are they supposed to pay for it?

Even with spending all of that money that we don't have, we haven't been able to even come close to everything on your list. I don't see how you could implement such a system without massive violations of property rights.

Kimball Kinnison

 

That may have been the case in the past, but social spending is outstripping military spending. It'll get worse in the future.

 

quote]

Even with spending all of that money that we don't have, we haven't been able to even come close to everything on your list. I don't see how you could implement such a system without massive violations of property rights.

Kimball Kinnison[/quote]

I understand your point, Kimball, but I'm curious as to what you see as a solution.

Personally, I think that the existence of the United States is at stake. I don't have all the answers, obviously, but at least some mixture of raising taxes and cutting spending is in order, with nothing in the budget sacrosanct.

Peace,

V-03

 

The first, most critical thing to do is go back to basic principles, such as "live within your means".

The government is a unique entity when it comes to budgeting. When normal people and organizations plan a budget, they have a limited amount of income available to them, and have to apply that income as best they can. The government, on the other hand, can arbitrarily choose to "increase" its income by raising taxes to fill out its budget. This tends to short circuit the usual techniques for creating a balanced budget, because the need to actually trim the budget is so much less.

Because of that, tax increases should always be a last resort for the government to balance the budget, not a first resort. You need to trim everything that you can to make it balance, just like anyone else would do. Only if that fails should you even consider increasing taxes.

There are some other major structural changes that should be made. This is going to sound radical, but I think it may be time for us to abolish Social Security as a separate tax/program. It's pretty much a fiction as it is, because the "trust fund" is a pile of IOUs that represent loans made to the general treasury. Eventually, they will come due and need to be paid back from that same general treasury. It's only independent of the general treasury on paper, and so we might as well stop lying about what it really is: one more income tax for the general treasury.

I've also never been one to say that any program should be off limits (you might be thinking of my brother who opposes almost any cuts to the military). Everything should be on the chopping block.

I also am a strong advocate of a flat tax with either a standard deduction per person, or a very limited and restricted set of deductible items (such as education, medical, or housing expenses). Everyone should be paying into the system, not just the upper 50%, even if a person receives more in services than they pay in taxes, they should still have to pay in from what they earn, and at the same rate. No more tax brackets for one group that don't also apply to another group. Why? Because it's not fair or just for one group to demand that another group's taxes should be raised. If a tax increase is justified, then it should apply to everyone, not just those earning more than some threshold. It's always easier to raise someone else's taxes than it is to agree to raise your own as well. 51% of the population shouldn't be able to insist that the other 49% foot all of the bills.

Kimball Kinnison