Posts Tagged ‘rich’

Only in America

Posted: 2 November 2015 in Uncategorized
Tags: , , , , ,


Apparently, Maine is going to start limiting the financial assets of welfare recipients, effectively discouraging them from saving money.

The state will place a $5,000 cap on the savings and other assets of residents enrolled in the Supplement Nutrition Assistance Program (SNAP). Those whose bank accounts, secondary vehicles and homes, and other assets considered non-essential by the government, exceed the limit will no longer be eligible to participate in the food stamp program. An individual’s primary home and vehicle won’t count toward the limit.

The thinking, according to the Gov. Paul LePage’s office, is simple: People shouldn’t be allowed to take money from the government if they don’t need to. “Most Mainers would agree that before someone receives taxpayer-funded welfare benefits, they should sell non-essential assets and use their savings,” LePage said in a written statement.

So, we now live in a country that is hellbent on surveilling and limiting the financial resources of poor people—but never asks the question of how much savings and other assets (from stocks to art) rich people have when it comes to paying taxes.


Special mention

rate_hike_cartoon_10.15.2015_normal 170400_600

What would happen if the United States raised taxes on the rich?*

Well, as it turns out, it wouldn’t do a whole helluva lot to improve the distribution of income. That would barely change. But the United States would be able to generate significant additional federal revenues—enough to fund a lot of new government programs to help the working-class.

50K 10mK

Let’s start by considering what has happened to federal income tax rates over the years. As is clear from the charts above (using the handy interactive calculator here), the effective tax rates for middle-income households and for those at the top both fell in the postwar period. But the rate fell much more at the top than in the middle (or, for that matter, the bottom). Thus, for example, the effective tax for households bringing in $50 thousand a year fell from 24 percent in 1945 (when the inflation-adjusted income was $3,920) to 13.3 percent in 2012—while the rate for households with an income of $10 million fell from 90.8 percent in 1945 (on an inflation-adjusted income of $783,996) to 34.7 percent in 2012.

Clearly, the small group at the top has enjoyed an enormous decrease in federal income tax rates on their share of the surplus during the postwar period, especially beginning in the early 1980s.

So, to repeat my question, what would happen if the United States reversed that trend and raised taxes on the rich?

According to a recent study by William G. Gale, Melissa S. Kearney, and Peter R. Orszag, an increase in the top marginal tax rate would not make the distribution of income significantly less unequal. For example, increasing the top income tax rate from 39.6 to 50 percent (which would raise taxes an additional $6,464, on average, for households in the 95-99th percentiles, an additional $110,968 for households in the top 1 percent, and an additional $568,617 for households in the top 0.1 percent) would only lower the Gini coefficient in the United States from 0.574 under current law to 0.572. And consider this: even if all of the additional revenue collected were redistributed evenly to households in the bottom 20 percent (thus $95.6 billion in revenue from an increase in the top rate to 50 percent, which would lead to an additional $2,650 in post-tax income for the bottom fifth of households), the Gini coefficient drops by less than .01 (to 0.565). In neither case does an increase in the top federal income tax rate substantially alter the unequal distribution of income.**

However, as Patricia Cohen points out, raising taxes on the rich would serve to increase federal revenues—by a significant amount. Thus, for example, raising the effective tax burden on the top 1 percent from 33.4 percent today to 45 percent (in other words, close to what it was in 1986) would generate about $276 billion in revenue just in the first year.

Even more:

If the tax increase were limited to just the 115,000 households in the top 0.1 percent, with an average income of $9.4 million, a 40 percent tax rate would produce $55 billion in extra revenue in its first year.

That would more than cover, for example, the estimated $47 billion cost of eliminating undergraduate tuition at all the country’s four-year public colleges and universities, as Senator Bernie Sanders has proposed, or Mrs. Clinton’s cheaper plan for a debt-free college degree, with money left over to help fund universal prekindergarten.

Clearly, taxing the rich has enormous potential in terms of financing new programs to benefit the American working-class. But it’s also not enough.

The fact that increasing the tax rate on the top groups would not significantly alter the distribution of income but, yet, generate enormous tax revenues is evidence of just how obscenely unequal the existing distribution of income is in the United States.

*Hopefully readers will find my analysis here useful. But, even if not, I certainly hope you enjoy Ed Asner in his inimitable style explaining why we need to tax the rich.

**Now, it is true, as John Quiggin points out, the Gini coefficient is not a particularly good measure of inequality (since it is much more sensitive to what happens in the middle of the income distribution than to the tails), and the tax-and-redistribute proposal would in fact substantially improve the income of the poor even if it doesn’t alter the distribution of income according to the usual measures.


Special mention

download www.usnews-1


Special mention

168357_600 168470_600


As the New York Times explains,

not every neighborhood in Manhattan has a million-dollar entry fee. The median price — what 50 percent of people paid less than — was just $910,000 over the last 12 months, and there are still places where the average residence sells for less than half a million. There are also some areas where prices declined.

But the “lower” end of the Manhattan market is shrinking. The proportion of the market that sells for less than $500,000 (again, after adjusting 2009 prices for inflation) dropped about 3 percent during the recovery.

Still, the sales of eight and nine-figure apartments are”yet another indicator that the richest of the rich have had the best recession recovery.”

 George Grosz, "Bürgerliche Welt/ World of the Bourgeoisie" (1922)

George Grosz, “Bürgerliche Welt/ World of the Bourgeoisie” (1922)

Back in 2011, I suggested we move from focusing on the pathologies of the poor to those of the rich. And that’s exactly what psychologists seem now to be doing. We’ve seen studies of “social class as culture,” “sharing the marbles,” and much more.*

The latest is Rael J. Dawtry, Robbie M. Sutton, and Chris G. Sibley on “social sampling—that is, the idea that wealthier people may be less supportive of redistribution than poorer people because they infer society is wealthier than it actually is because they are surrounded by other wealthy people. And that’s exactly what the authors found:

wealthier (relative to poorer) Americans reported moving in wealthier social circles and extrapolated from them when estimating wealth levels across America as a whole. . . In turn, these estimates were associated with the perceived fairness of wealth distribution in America and with opposition to redistribution, a finding that is consistent with theory on normative-justice judgments.

These results suggest that the rich and poor do not simply have different views about how wealth should be distributed across society; rather, they subjectively experience living in societies that have subtle—but important—differences. Thus, in the relatively affluent America inhabited by wealthier Americans, there is less need to distribute wealth more equally.

Dawtry, Sutton, and Sibley are certainly on to something: we often arrive at social judgments based on anecdotal evidence—things we have either heard or seen—and many of our anecdotes are produced or disseminated within our particular social circles. Those circles are our “sample.”

But that’s not enough. Because we also have other knowledges of the world around us—knowledges that come from the news, novels, music, religious sermons, political speeches, and so on. We’re not just limited to what is said and repeated within our narrow social circles.

So, sure, wealthy people might think the rest of society looks like the worlds in which they live and work. But they also know, through other means, that it isn’t really like that. There are many more people earning far lower incomes than they might come across on a daily basis. Grotesque inequalities exist and they’re getting more and more extreme.

If the rich don’t know about those inequalities, given the other knowledges that are widely available, then they are engaged in practices of willful ignorance.

And that’s another pathology we need to take into account.

*Readers will note I find myself always turning to George Grosz to illustrate my discussions of these studies. There must be some other artists I can use. Any suggestions?