Income distribution: (in)equitable?

[melm00se]

http://www.latimes.com/news/opinion/commentary/la-oe-norton-wealth-inequality-20101108,0,1887934.story

Spreading the wealth
The gap between rich and poor in the U.S. is bigger than at any time since the 1920s. Is that really what most Americans want?
By Michael I. Norton and Dan Ariely

The gap between the wealthiest Americans and the poorest is bigger than at any time since the 1920s — just before the Depression. According to an analysis this year by Edward Wolff of New York University, the top 20% of wealthy individuals own about 85% of the wealth, while the bottom 40% own very near 0%. Many in that bottom 40% not only have no assets, they have negative net wealth

the most interesting excerpts is here:

While liberals and the poor favored slightly more equal distributions than conservatives and the wealthy, a large majority of every group we surveyed — from the poorest to the richest, from the most conservative to the most liberal — agreed that the current level of wealth inequality was too high and wanted a more equitable distribution of wealth. In fact, Americans reported wanting to live in a country that looks more like Sweden than the United States.

This begs the question: how is it, if this survey is accurate, that higher tax rates on upper incomes hasn't come to pass?

[Gaedel]

1. Once again

The confusion between income and wealth.

Wealth is the assets you own such as real estate, stocks, bonds, gold, or cash in hand or in the bank.

Income is your annual take from employment, retirement, stock dividends, bond interest, bank account interest, rents, or capital gains.

Higher income tax rates do not affect "wealth".

Wealth is taxed only by the estate tax.

[dkf]

2. Damn you are one of the few who gets it.

[Jackpine Radical]

4. The distinction between wealth & income parallels that

between debt and deficit.

A higher income tax doesn't directly affect one's total wealth, but it does somewhat impact the rate at which new wealth is accumulated. A major problem of course arises from the fact that much of the income of the wealthy comes from sources that are taxed at lower rates than earned income.

[unblock]

7. wealth is also, albeit imperfectly, subject to property taxes

it's not exact, and varies from town to town, but you have to be fairly well off to be subject to taxes on a multi-million dollar house.

moreover, wealth and income are linked in the sense that great wealth can effortlessly generate great income. a billionaire can put it all in a savings account and generate more income than most of us will earn in a lifetime of labor.



taxing income as a proxy for wealth, even if theoretically incorrect from a policy standpoint, has a few pragmatic advantages over taxing wealth. primarily, it is much easier to detect income and enforce a tax on it. by definition, there is a counterparty in the case of any income, and so there is a fear that the payer will report the recipient. wealth, on the other hand, can be more readily moved or hidden or disguised. the exception is property, and surprise, surprise, there's a tax on that.


one more thought, i'm not sure the constitution permits a wealth tax. there's an amendment explicitly permitting an income tax.

[Gaedel]

8. Some states

Some states have a "wealth tax" called a State Intangibles Tax which taxes the value of stocks, bonds, receivables, and cash on hand.

[unblock]

9. interesting, i did not know that!

[Gaedel]

12. Intangibles tax

Michigan I know has such a tax.

Florida had one till a couple of years ago when Jeb got rid of it to make the state more attractive to well-to-do retirees.

[dkf]

3. Maybe income inequality has more to do with the value of what is produced by an individual.

If a Tomato sells for a dollar the person producing it will get less than a tomato that sells for $5. Maybe the problem with income inequity has to do with the price deflation of certain items compared to the price inflation of others.

If doctors charged $50 an hour they wouldn't make as much as if they charged $300 an hour. Income is all in the pricing power.

[Gaedel]

5. This then gets into the argument

that there are many people whose labor value is not "worth" the minimum wage.

Sometimes, even with "pricing power" there is a point at which you pass into negative returns. Apple is the only maker of IPads. If they priced them at $10,000 would they make as much money as pricing them at $500?

[dkf]

13. Competition is killing pricing power.

Yet this will change when the price of oil goes up and it is really expensive to transport goods. In a way keeping oil prices low subsidizes cheap labor in other countries.

[Romulox]

6. Who is John Galt?

:puke:

[Hannah Bell]

11. no, it doesn't.

[TexasObserver]

10. recommend