Good Seattle Times Colmun on Taxes(!)

[KaskadskyjKozak]

KKK read pages 6-9 on this and tell me if you feel any differently.

 

http://www.cbo.gov/ftpdocs/83xx/doc8306/07-11-CarriedInterest_Testimony.pdf

 

"An internal error occurred"

[j_b]

How is that relevant considering the inequalities in income? I'd rather these 2 paid their fair share in taxes than give to charities.

 

even *less* than Newt? for shame!

 

Pretending that people who work for a living should compare their donations with that of plutocrats is beyond stupid. Time for you to get out of the sand box!

 

 

 

 

Edited February 1, 2012 by j_b

[KaskadskyjKozak]

How is that relevant considering the inequalities in income? I'd rather these 2 paid their fair share in taxes than give to charities.

 

even *less* than Newt? for shame!

 

Pretending that people who work for a living should compare their donations with that of plutocrats is beyond stupid. Time for you to get out of the sand box!

 

 

 

 

All members of the Mormon church tithe - including the majority of them who "work for a living", many of whom make less than you. Many Evangelicals that you despise do likewise.

 

And don't call me "stupid" - remember, behave!

 

 

 

[j_b]

Someone's ability to pay taxes compared to that of a plutocrat like Romney isn't a relevant consideration in the context of whether 14% of $21 million is sufficient taxation while inequalities and deficits are at record levels. Pretending otherwise is a stupid argument.

 

Donations to a church aren't taxation and shouldn't be compared to it, unless you believe there shouldn't be separation between church and state.

[jon]

It's weird to count SS and Medicare as taxes, particularly so for people in the lower end of the pay-scale, for two reasons.

 

The first is that they were and are sold as mechanisms by which people set aside their own personal money to finance their own personal benefits - essentially a forced savings program.

 

The second is that the less money you make, the more likely you are to get far more money out of those programs than you paid into them.

 

The Romney super PAC has hacked JayB's account!

[Crux]

Romney exposed!

[JayB]

Someone's ability to pay taxes compared to that of a plutocrat like Romney isn't a relevant consideration in the context of whether 14% of $21 million is sufficient taxation while inequalities and deficits are at record levels. Pretending otherwise is a stupid argument.

 

Donations to a church aren't taxation and shouldn't be compared to it, unless you believe there shouldn't be separation between church and state.

 

 

Whatever's been driving household income inequality clearly isn't happening at the individual compensation level.

 

This data series and others show quite clearly that shifts in behaviors outside the workplace that determine whether or not people have children inside or outside of marriage or not, whether or not they stay married and all of the other habits, behaviors, and values that influence the formation and stability of households is a much more significant factor.

 

It's not clear how clamping down on CEO pay is going to promote the sort of values, behaviors, and practices that promote household formation and stability amongst the folks in the lowest income quintiles, who have the highest divorce rate, most children outside of marriage, etc, etc, etc.

 

[j_b]

 

Whatever's been driving household income inequality clearly isn't happening at the individual compensation level.

 

This data series and others show quite clearly that shifts in behaviors outside the workplace that determine whether or not people have children inside or outside of marriage or not, whether or not they stay married and all of the other habits, behaviors, and values that influence the formation and stability of households is a much more significant factor.

 

It's not clear how clamping down on CEO pay is going to promote the sort of values, behaviors, and practices that promote household formation and stability amongst the folks in the lowest income quintiles, who have the highest divorce rate, most children outside of marriage, etc, etc, etc.

 

 

Witness JayB's usual denialist cherry-picking techniques in all their splendor.

 

First, the GINI coefficient has increased by 20% since its low in the early 70's, yet you decided to show us a plot starting in 1994 when the rate of increase in coefficient decreased (coincidence? I think not)

 

http://en.wikipedia.org/wiki/Gini_coefficient

 

Second, the GINI index for income inequalities doesn't account for the cost of non-discretionary spending like health care, housing and schooling, transportation, regressive taxation, etc ... that have gone through the roof in the last 30 years. But, we have gone over this so many times and you still refuse to acknowledge it. Your tone-deafness is staggering.

 

Even though, time series of income by brackets tell part of the story pretty well by themselves (no need to obfuscate furhter what is plainly obvious):

 

 

Edited February 2, 2012 by j_b

[JayB]

I think that your data on household inequality is correct, my point was that the overwhelming majority of the household income inequality are driven by social factors (divorce, having children outside marriage, etc) that are independent from how much people are making on the job.

 

Easy example. Family A and Family B have two income earners each. Family B divorces and splits into two households. The household income inequality between A and B, formerly zero, has instantly increased by 100% despite the fact all of the individual incomes have remained the same after the split.

 

If you look at the data (see the table above), it's clear that there are a lot more "Family B's" in the lower income quintiles, and the difference in divorce, illegitimacy, etc betwen the top and bottom income quintiles has steadily increased since the 1970s.

[j_b]

I think that your data on household inequality is correct, my point was that the overwhelming majority of the household income inequality are driven by social factors (divorce, having children outside marriage, etc) that are independent from how much people are making on the job.

 

Of course that was your point, and I am not denying that it might play a part in it but it doesn't change that median male income is lower than it was 30 years ago, female median income has increased in great part due to increased working hours, and that non-discretionary spending have sky-rocketed to the point where many can't afford them anymore.

[Jim]

While it's true that those factors have always had a role on poverty, they don't go far in explaining the trend over the past 20 years of a huge gap between gains in productivity and wage stagnation. The only way households are keeping up in the middle class is because now there are two adult workers where there used to be one.

 

The Gap

[JayB]

Real median pay *has* gone down if you exclude benefits from compensation. If you include them, it has gone up steadily.

 

Non-cash benefits have become a more significant percentage of total compensation. The lower you are on the pay scale, the more dramatic the effect is.

 

Still a minor effect relative to the effect of household composition when it comes to household income inequality.

[Jim]

Non-cash benefits have become a more significant percentage of total compensation. The lower you are on the pay scale, the more dramatic the effect is.

 

Still a minor effect relative to the effect of household composition when it comes to household income inequality.

 

The link I provided includes a line for both wages and total compensation. With total compensation worker productivity still outpaces worker wages by a factor of 10. Someone is getting that cash. Trickle up theory in action.

[JayB]

Total comp has still gone up. It's not entirely clear that there's much or anything that can be done to close the gap between productivity growth and compensation growth since the labor/skill/training component of productivity gains has been vastly outstripped by the gains driven by increasing automation, which is what gives us the tables like the one below:

 

 

The returns to the inventor and the owner the robot that can enable one guy to do the work of 20 are always going to be higher than the gains to the one guy who operates the robot. What do you propose to do about that?

 

The other thing to bear in mind is that in the absence of a monopoly in which producers and capture all productivity gains, the vast majority of the monetary benefits associated with productivity gains accrue to consumers - who get vastly better stuff at dramatically lower prices.

 

Imagine a farmer that hires a combine operator to harvest a thousand acres of wheat in a day, and compare that with a farmer who has to hire a thousand people to do the same thing by hand. Then ask yourself what effect this has on the price of food. Who benefits the most under this scenario - the farmer, or the thousands of people who get the same amount of food at a dramatically lower cost?

[Jim]

The returns to the inventor and the owner the robot that can enable one guy to do the work of 20 are always going to be higher than the gains to the one guy who operates the robot. What do you propose to do about that?

 

Imagine a farmer that hires a combine operator to harvest a thousand acres of wheat in a day, and compare that with a farmer who has to hire a thousand people to do the same thing by hand. Then ask yourself what effect this has on the price of food. Who benefits the most under this scenario - the farmer, or the thousands of people who get the same amount of food at a dramatically lower cost?

 

Those are interesting examples, but the vast majority of folks don't work in either manufacturing or farming these days. But yes, the computer, as an example, has helped increase the productivity of office jobs as well. That said, I don't know what is the solution - it is apparant, however, that the gains in productivity - increased profit and wealth, are not being shared - I wouldn't even say equally because there is a risk in business ownership - but the upward push of benefits is obvious while the middle class is slumping. Yet cranking it out for the boss man.

[JayB]

The returns to the inventor and the owner the robot that can enable one guy to do the work of 20 are always going to be higher than the gains to the one guy who operates the robot. What do you propose to do about that?

 

Imagine a farmer that hires a combine operator to harvest a thousand acres of wheat in a day, and compare that with a farmer who has to hire a thousand people to do the same thing by hand. Then ask yourself what effect this has on the price of food. Who benefits the most under this scenario - the farmer, or the thousands of people who get the same amount of food at a dramatically lower cost?

 

Those are interesting examples, but the vast majority of folks don't work in either manufacturing or farming these days. But yes, the computer, as an example, has helped increase the productivity of office jobs as well. That said, I don't know what is the solution - it is apparant, however, that the gains in productivity - increased profit and wealth, are not being shared - I wouldn't even say equally because there is a risk in business ownership - but the upward push of benefits is obvious while the middle class is slumping. Yet cranking it out for the boss man.

 

Well - it was just a representative example to show that you've got to consider the impact of productivity gains on both consumers and producers to get an accurate picture of the effect on society. It's happening in every sector, but it's just easier to think through examples with tangible inputs and outputs.

 

On the intangible side, the supply-chain and inventory management efficiencies pioneered by the likes of Walmart have spread throughout the entire retail sector and have, thanks to competition amongst retailers, resulted in dramatically lower prices than we'd have otherwise. The aggregate effect has increased consumer purchasing power by hundreds of billions of dollars, but the folks working in the warehouses probably aren't making any more money - so consequently the gap between productivity and total compensation for workers in that sector has probably increased massively.

 

How much of a financial cut should the guys working in the warehouse who had nothing to do with developing or financing these innovations get from these productivity gains? The answer from consumers is clearly "little or none," since it's their comparison shopping that has driven the entire phenomenon.

 

Also - one last chart for the day. I agree that the statistics show that the middle class is shrinking, but it doesn't appear to be because the percentage of households in the lower income quintiles is expanding...

 

[Peter_Puget]

Wal-Mart Rules!

"Surprisingly, the primary source of the productivity gains of 1995 to 1999 was not increased demand resulting from the stock market bubble, as some economists have claimed. Nor was information technology the source, though companies accelerated the pace of their I.T. investments during those years," reports a summary of the findings published in The McKinsey Quarterly. "Rather, managerial and technological innovations in only six highly competitive industries -- wholesale trade, retail trade, securities, semiconductors, computer manufacturing and telecommunications -- were the most important causes."

https://www.mckinseyquarterly.com/Whats_right_with_the_US_economy_1151

 

https://www.mckinseyquarterly.com/Retail_The_Wal-Mart_effect_1152

 

Another groovy link. Read the executive summary at least.

 

http://www.ihsglobalinsight.com/publicDownload/genericContent/11-03-05_walmart.pdf

 

Somewhat related:

 

http://mercatus.org/publication/millionaires-unlikely-stay-millionaires-long

 

 

My guess is that over the last 30 years those at the mid-higher income levels have increased their worked hours by a greater amount than those in the lower income levels. (Most are salaried too!)

 

[j_b]

Real median pay *has* gone down if you exclude benefits from compensation. If you include them, it has gone up steadily.

 

Non-cash benefits have become a more significant percentage of total compensation. The lower you are on the pay scale, the more dramatic the effect is.

 

Still a minor effect relative to the effect of household composition when it comes to household income inequality.

 

So according to you, compensation beside income has increased by nearly 200% in 50 years? I hope that you vet the charts that you are posting because this one isn't making much sense considering that Legacy pensions are gone, benefits have been chopped as most everyone can witness, and the number with health insurance has decreased over the last 30 years:

"The percentage of persons under age 65 years with private coverage rose between 1959 and 1968, to 79%, remained stable until 1980, and then declined to 67% by 2007. During the 1980s, the percentage of persons with no coverage increased, while the percentage with private coverage declined and the percentage with Medicaid remained stable. Since 1990, the percentage of nonelderly persons without coverage has remained stable, but the number has increased by more than 6 million persons, to 43.3 million in 2007. During this period, the percentage with private coverage has continued to decline, while the percentage with Medicaid has increased. Recent trends in coverage based on the NHIS and CPS are similar."

http://www.cdc.gov/nchs/data/nhsr/nhsr017.pdf

 

Health care costs have gone up but it is also in great part to pad the accounts of the health care industry, while the coverage of most working people has decreased.

[j_b]

 

How can you believe both this chart and the chart above showing an increasing family GINI coefficient over the same period?

 

I think that in the future you should spend more time on what goes into the charts you post (or present what they are showing) rather than posting more of them because they raise more questions about your methods than anything.

[JayB]

It's not like I'm making up the data. I've forgotten the source for the first but pretty much every plot of productivity, total compensation, and take home pay over the same period will look like that.

 

If healthcare costs rise at a few percent a year then over 50 years it doesn't seem inconceivable that the total magnitude of the costs could double. Ditto for the same compounded increase driving the average cost relative to compensation up even as the percentage of the workforce with private coverage declines.

 

If the percentage of households in the upper quintile (I believe the data is from the census, but if you follow the embed code back to the URL I'm sure that you can find it) increases and the percentage in the lowest/lower quintile stays constant that doesn't necessarily seem inconsistent with rising household income inequality to me. I honestly can't remember how the Gini coefficient is computed, but if I'm completely wrong on that let me know.

 

 

[j_b]

You are not making up the data analysis implied by these graphs but you don't know what goes into it and you are misrepresenting it. You are implying that people who work for a living are seeing an increase in compensation when in fact everything points to most people getting less compensation beginning in the early 80's (stagnant or decreasing income, good bye legacy pensions, fewer people getting less health care coverage, most paying a greater share of their health coverage and pension, etc). Employers pay more for some benefits today, which is entirely consistent with non-discretionary spending like health care getting out of hand and thus effective total compensation going down, but it doesn't change that the share of national income captured by the 1% has sharply increased.

Edited February 3, 2012 by j_b

[j_b]

Huge disparity in share of total wealth gain since 1983

By Lawrence Mishel | September 15, 2011

 

It is widely acknowledged that wealth declined substantially between 2007 and 2009 as the housing bubble burst and stock prices fell. This wealth shrinkage was especially hard on the middle class and those groups (such as African Americans) whose house is their primary source of wealth. It is far less appreciated that this is a long-term trend, and that wealth is now lower for the typical household than it was a generation ago in 1983, while the wealth at the upper end expanded a great deal.

 

[..]

 

the richest 5 percent of households obtained roughly 82 percent of all the nation’s gains in wealth between 1983 and 2009. The bottom 60 percent of households actually had less wealth in 2009 than in 1983, meaning they did not participate at all in the growth of wealth over this period.

 

 

http://www.epi.org/publication/large-disparity-share-total-wealth-gain/

[j_b]

So, if you make $50,000 per year and health care inflation made your premium go up by $2000 (and your boss decided he'd split the difference), JayB thinks you are doing better since total compensation on paper is now $51,000. Never mind that your income hasn't budged and that you get to spend $1000 more on health insurance.

[JayB]

You are not making up the data analysis implied by these graphs but you don't know what goes into it and you are misrepresenting it. You are implying that people who work for a living are seeing an increase in compensation when in fact everything points to most people getting less compensation beginning in the early 80's (stagnant or decreasing income, good bye legacy pensions, fewer people getting less health care coverage, most paying a greater share of their health coverage and pension, etc). Employers pay more for some benefits today, which is entirely consistent with non-discretionary spending like health care getting out of hand and thus effective total compensation going down, but it doesn't change that the share of national income captured by the 1% has sharply increased.

 

Well, I suppose we'll just have to disagree about the extent to which I understand the methodology behind the figures. With regards to the gini-coefficient in particular, I took a moment to refresh my memory about how it's calculated, and it doesn't seem like a dynamic where the proportion of households above a particular income threshold is increasing while the proportion in the lowest quintiles stays constant is inconsistent with an increasing gini coefficient.

 

Per the internets the gini coefficient is equal to A/A+B, and it seems like expanding the percentage of households in the top income quintile could easily shift the curve that defines B in a way that increases A and thus increases the Gini coefficient.

 

 

As far as income is concerned, it's just not the case that households in any quintile are making less money than they were 20-30 years ago. The folks who happen to be in the top quintile in 2007 are making dramatically more than the people who happened to be in the top income quintile in 1979, but as I've been saying the composition of households has changed over that period of time, and quintiles are dynamic statistical abstractions, not actual people. Quite a few of the people who were in the top quintile in 1979 are dead, some of the people in the top quintile in 2007 weren't even born in 1979, and people move through various quintiles over the course of their working lives.

 

 

I'm sure that the chart that you've posted about the share of wealth relative to the whole is correct, but "share of wealth" is different than annual income, which is not the same thing as absolute wealth. It's entirely possible for a household to have seen a decrease in their share of national wealth decline since the early 80's, despite the fact that both their annual income and the value of all of the assets that they own are higher in real terms.

 

 

[j_b]

Well, I suppose we'll just have to disagree about the extent to which I understand the methodology behind the figures.

 

That must be why you acknowledged up thread not knowing where one of your figures came from, or didn’t acknowledge that you presented suspiciously truncated GINI time series that disappeared more than ½ the increase in GINI since the beginning of the neoliberal era, or claimed that since total compensation on paper had increased by some ungodly amount, real pay had in fact increased.

 

With regards to the gini-coefficient in particular, I took a moment to refresh my memory about how it's calculated, and it doesn't seem like a dynamic where the proportion of households above a particular income threshold is increasing while the proportion in the lowest quintiles stays constant is inconsistent with an increasing gini coefficient

 

Per the internets the gini coefficient is equal to A/A+B, and it seems like expanding the percentage of households in the top income quintile could easily shift the curve that defines B in a way that increases A and thus increases the Gini coefficient.

 

 

The GINI is nothing more than a normalized cumulative frequency distribution and there is little reason to suspect it would behave in some peculiar way. Your graph shows that whereas ~36% of families made more than $50k in 1967, in 2006 ~55% are above this threshold. In turn, a smaller fraction of families are in each of the mid and lowest 2 quintiles. None of this suggests that an increasing GINI would result. Now, discrete representation of income brackets such as in your plot obscures what’s going on at the edges, as we now all too well from witnessing the sky-rocketing income of the 0.01%, which could explain the apparent discrepancy whereas increasing median family income is likely explained by massive entry of women in the workforce since the 70’s.

 

It is also interesting how according to you dislocated families explain some decrease in household earning, yet the rise of the 2 incomes household isn’t a blip on your radar to explain the rise in household income …

 

As far as income is concerned, it's just not the case that households in any quintile are making less money than they were 20-30 years ago.

 

I didn’t mention households. I said people’s income had gone down or been stagnant such as the male median income (note this goes only through 2002 as it is surely worse today):

 

 

 

you couldn’t file a graph that showed the lowest quintile to substantiate your claim that all quintile incomes had increased? What about showing a graph through 2010, such as this one:

 

 

I'm sure that the chart that you've posted about the share of wealth relative to the whole is correct, but "share of wealth" is different than annual income, which is not the same thing as absolute wealth. It's entirely possible for a household to have seen a decrease in their share of national wealth decline since the early 80's, despite the fact that both their annual income and the value of all of the assets that they own are higher in real terms.

 

Indeed, you keep showing us how “entirely possible” it is for someone to explain just about anything.