Opinion

Felix Salmon

Income distribution charts of the day, middle-class edition

By Felix Salmon
December 20, 2011

Ian Ayres has an excellent post at Freakononomics today, explaining some of the background thinking behind his inequality tax proposal:

An important goal of our op-ed was to suggest a new unit of measure, “medians” to help us think about what it means to be rich. In 1980, if you earned 3.8 medians, you were in the top 1 percent, but by 2006 even the poorest in the 1 percent club earned 6.9 medians.

What we call the “Brandeis Ratio,” the average income of the richest 1 percent (which includes the billions earned by the lucky few) has grown even more disproportionate. As shown in the chart below, in 1980, one-percenters on average made 12.5 medians, but in 2006 (the latest year in which data is available) the average income of our richest 1 percent was a whopping 36 medians.

brandeis-ratio.png

Ayres makes a strong case that there’s a real societal interest in capping this ratio somewhere — “it would be bad for our democracy,” he writes, “if 1-percenters started making 40 or 50 times as much as the median American.” So let’s not tax income; let’s instead tax inequality, and increase taxes on the 1% if and only if inequality is going up rather than down.

But here’s the thing: 36 times median income corresponds to an annual income of $1,780,020. I think we can agree that anybody earning over a million dollars a year is rich: that’s just 20 times median income. The 1% on average hasn’t earned that little since 1995.

Meanwhile, what does it mean to be middle class? Here, Ayres found a fascinating survey from 1997, which I’ve put into chart form:

md.png

What’s fascinating here is that in a survey of Americans, fewer people think that a household earning $100,000 a year is middle class than think that a household earning $40,000 a year is middle class. (The actual question was “Would you consider a family of four making (INSERT AMOUNT) a year to be middle class?”)

Most people agree — although not by an overwhelming margin — that households earning somewhere in the $50k-$60k range count as middle class. But once you get to $80k, the number of people considering that to be middle class becomes a minority, and once income hits six figures, only one American in three still thinks that the household in question is middle class.

Now I can assure you that, to a first approximation, every household in America with an annual income of $100,000 considers itself to be middle class. But already those households are earning twice as much as the median family. And it turns out that from the perspective of the bottom 60% or so, an annual income of $100,000 is so big that it’s not even middle class any more.

Why doesn’t the bottom 60% of the US population seem to have any real political voice any more? As Ayres points out, even Barack Obama says that anybody earning less than $150,000 is “basically middle class”, while “rich” doesn’t kick in until $250,000 or more.

What does seem pretty clear is that there’s a gap, in the popular imagination, between “middle class” and “rich”. What do you call people earning $200,000 a year? If they’re not rich, they’re not really middle class, either. “Affluent”, perhaps? No one wants to raise taxes on this group. But they’re still winners in the modern economy, and they’re not struggling in the way that most Americans are.

Here’s Tim Harford, on the situation in the UK:

The Joseph Rowntree Foundation, which uses a thoughtful and innovative methodology to estimate the minimum income necessary to achieve a “socially acceptable” standard of living, reckons that a family of five with one breadwinner – my situation today and my father’s at the time – needs £690 a week before tax. Since 80 per cent of employees earn less than that, it is easy to see why many families require two incomes, and why many struggle at Christmas.

I’m sure that the situation in the US is even worse, given that inequality here is greater than it is over there. But let’s say that it’s the same: we’ve reached the point at which 80% of workers don’t earn enough to support a good-sized family. How much further can that ratio rise, before we say “enough”?

Comments
38 comments so far | RSS Comments RSS

Keep up the good work, Felix. Quantitative information on income distribution is generally lacking in the MSM and usually is found in nooks and crannies like yours. Thanks!

Posted by upstater | Report as abusive
 

The “$100,000 a year income is wealthy” debate has to be stopped. Wealth is so dependent on where you live. A middle class home in the middle of the country might cost $50,000, but ten times that in California. And when housing, the biggest expense for most people, costs more, everything else does also, as the people who service the residents end up getting paid more.

The only purpose this debate serves is to further polarize the nation along a boundary that isn’t even accurate. The issue shouldn’t be who is wealthy, but rather at what point are we undermining the economy by distorting the flow of money (I don’t mean imports and exports, but work performed, income received, taxes paid, etc.)?

Posted by KenG_CA | Report as abusive
 

How long? Somewhere between 500 years and indefinitely. I don’t see that there is a mechanism in the US to enforce change. Congress is owned by the 1%; the only debates that occur there are between different sections of the 1%. And that 1% will do their best to squash citizens that threaten them, at the cost of wider society, witness SOPA.

KenG_CA: housing costs a lot more based on where you live, sure, but most other living expenses don’t vary that much. Food is still really *really* cheap in northern CA compared to other western economies (most likely down to immigrants). And globally traded goods, absent taxes and duties, are approximately the same cost everywhere.

I found it amusing to read James Altucher’s blog talking about income disparities. Someone asked him, “what’s your take on (excessive) CEO-compensation? Is Blankfein really worth 20 mio/y?” – his response – “A very wise man once told me ‘I won’t look in what is your pocket and you don’t look at what is in my pocket.’”

http://www.jamesaltucher.com/2011/12/ask -james-obesity-sleep-regrets-crappy-boss es-and-the-meaning-of-life/

That’s the creed of a thief and a con-man; people out to trick others out of their money, who think that as long as it’s legal, it’s moral, that if you extract money by means of your brains rather than your brawn, all’s fair. Altucher has ascended the ranks of the monied, and fallen back down; but his trip has blinded him, he has lost his ability to see, most likely because he had to convince himself that he was in fact worth the money he used to make. Adopting a sense of entitlement is the easiest way of getting rid of the guilt.

Posted by BarryKelly | Report as abusive
 

“And when housing, the biggest expense for most people, costs more, everything else does also, as the people who service the residents end up getting paid more.”

Interesting perspective, Ken. Your focus seems to be on the paying of service people more, not on the costs of living being more for such a person. That suggests which side of the tracks you’re coming from.

I agree with you that it would be interesting to see how the internal flow of money is changed by all this inequality. Once upon a time it may well have been that money of the rich trickled down to the poor, but as has been said, these days that trickle down effect benefits the Chinese, not Americans or Europeans. I’m also not so sure that the effect is real at the levels of inequality we now have which are so large as to distort the normal rules.

Once you reach a certain level of wealth, unless you have some sort of psychological imbalance propelling you forwards so that you desperately pursue wealth unhappily, the impetus to reinvest the money in more of the same strategies that built it is reduced.

At that point, Maslow’s hierarchy of needs shows that peer group ackowledgement is more important than obtaining basic food and shelter – perhaps why Bill Gates now does what he does and not what he did. It might also reflect the fact that he is probably more fulfilled as a person now than before. So what? So at that point, the money isn’t recycled, it’s stored and some of it is given away to sectors with no return valve.

In that scenario, nothing happens, the wealth needs to be recycled and is being hoarded instead.

Posted by FifthDecade | Report as abusive
 

BarryK, when housing is expensive, your teachers, firefighters, police, and all public employees get paid more, so taxes are higher. Nobody takes jobs in fast food restaurants for even the minimum wage, let alone mid-priced restaurants. Household help at the minimum wage? Not in my southern California town. Supermarket workers also get paid more than minimum wage. And in urban areas, where $100,000 buys you less than in rural areas, transportation costs more. My point was that the cost of living varies widely across the U.S., and it’s not safe to say $100K annual income qualifies you as wealthy, just comfortable.

FifthDecade, I wasn’t focusing on paying service people more (I shouldn’t have used the word “service”), but rather all of the people who work locally that end up adding cost to things everybody buys and needs (see my response to Barry). But what side of the tracks do you think I come from (or live on now)?

I agree with your analysis on the trickle down flow of money, it doesn’t work, and never did. Trickle up works far better, but it’s not intuitive enough for the 1%, I guess.

Posted by KenG_CA | Report as abusive
 

Ken, analysing how people write shows where they place their own priorities, and where they are used to dealing with stuff. Of course it’s not perfect, but those who know a little of NLP find it useful nonetheless. For instance, someone used to employing others, whether personally or as a business person or manager, or someone whose job it is to study this field, will be more likely to talk about the cost of employing people; those people most likely not to be in that group, the people who actually do the work, shift the boxes, drive the trucks, make the widgets, clean the hotels, they are the people who will be most likely to talk about the cost of living.

From what you have written I would hazard a guess (and of course I could be wrong) but I would guess that you are not in the position of shifting the boxes or driving the trucks, but of the first group who are much more likely to take on and employ people or receive a service from them. I don’t say these two groups are the 1% and the 99%, but clearly there will be few people in the 1% who come through the box shifting route (although they may run a business that shifts boxes).

@BarryKelly You should travel more, you’ll soon discover the price of things is not uniform, not even when they are digital. Software prices in the UK are always 30% to 60% higher than they are in the US. Food in Switzerland is always 20% to 30% more expensive than in neighbouring Germany. The cost of enough food to support a family in Africa is tiny compared to the cost in California, and the cost of an apartment in New York is crazy compared to one in Glasgow.

I will agree with you however that the cost of commodities is pretty uniform, before taxes or duties; but manufactured goods vary considerably, even though they are all mostly made in China now.

Posted by FifthDecade | Report as abusive
 

Even the minimum wage is 10% higher in CA than the federal standard…

San Francisco and NYC are literally almost twice as expensive as your typical Texas city.

http://www.census.gov/compendia/statab/c ats/prices/consumer_price_indexes_cost_o f_living_index.html

Posted by TFF | Report as abusive
 

“Ken, analysing how people write shows where they place their own priorities, and where they are used to dealing with stuff.”

FifthDecade, you are very bad at analyzing people’s priorities or opinions in this fashion. Would recommend you take your assumptions about people with a hefty grain of salt.

Posted by TFF | Report as abusive
 

In the true spirit of Christmas, may we suggest a “Modest Proposal” – that instead of “taxing” – literally and/or figuratively, Those People…
what we should – as in economically, sociologically, legally and maybe even morally – do…
is require each of them, each year to “eat” – literally and figuratively – as many “Medians” as they are now equal to.

We mean, really, how many problems would that not solve for U.S.?

Posted by JGBHimself | Report as abusive
 

“I will agree with you however that the cost of commodities is pretty uniform, before taxes or duties; but manufactured goods vary considerably, even though they are all mostly made in China now.”

The cost of manufacture of goods made in China is typically only a small fraction of the sale price in the US.

A friend from India once painted an picture for me of the middle-class lifestyle there. Household servants taken for granted (relative cost a fraction of what it is here), but electricity and refrigeration were considered an expensive luxury (relative cost probably 10x what it is here).

Posted by TFF | Report as abusive
 

Fantastic Post Felix!

I will agree in principal that at some level income inequality or wealth inequality becomes a problem. I’ll go further and submit to the left’s assertion that we may already be at or beyond that point.

All I ask in return for my idological concession is that you and Paul Krugman admit that there is a non-trivial percentage of the able-bodied working age population (>10)% that would prefer a subsistance level existance without any of the stresses or burdens of a full time job.

Furthermore there is another non-trivial percentage of our society (also >10%) who want nothing more than perpetual employment at entry level positions. In the 10 years I’ve worked there, my community bank has offered promotions and meaningful raises to a least a dozen entry level people who show up on time, do their work accuratly, are great with customers…

…and have politely declined the increased responsibility. They don’t want the stress, the unpleasent tasks of repremanding co-workers for dress code violations or, time and attedence issues, or job performance. $10 – $12 dollars hourly plus good benefits are enough for them.

Those people fall into the “1/3 of people at or near poverty.” Let’s provide those people a strong national defence, paved roads, a spaceprogram, low interest loans to attend community college if they ever change their minds, a national park system… heck let’s even throw in an earned income tax credit to make their federal tax rate -5%… but how much further than that should society go to close the equality gap between them and the people who built this country?

Posted by y2kurtus | Report as abusive
 

FifthDecade, I wasn’t talking about the cost of employing people, but rather that how the cost of housing impacts how much people are paid in a given area. I talk more often about the cost of living than the cost of employment; I only brought up the latter because my claim that housing is a big driver for the cost of living was challenged. The cost of housing has a second order effect that impacts the cost of lots of things in a given community, and can’t be discussed without mentioning how much people are paid (and how that is dependent on the cost of housing).

Posted by KenG_CA | Report as abusive
 

y2k, I think your estimate of the able-working age population that would prefer a subsistence level existence over a full-time job is way too high, and it’s more like 2% or less. My proof is this: think of all those horrible, boring, repetitive, unrewarding jobs that garner no respect, let alone gratitude or enough compensation to change your life. All those people working in those jobs are choosing to do them instead of welfare or some other basic subsistence level. Nobody would take those jobs if they didn’t have to, and many of those people could get by on public assistance, but they choose not to.

You give an example of where people turn down promotions; I think that is more evidence of employers trying to get as much as they can for as little as possible – my guess is they aren’t offering enough of a boost to justify those extra responsibilities. What would the next level yield them, after taxes, another $20/week? What if the bank offered a bigger incentive, do you think more people would take the risk?

I think almost everyone (>98%) wants to contribute, to be a part of society, and that many of them are afraid of failing. You talk about giving them low interest loans to attend community college, but what will this sideways economy give them in return for that investment? A park that they have to pay $25 to enter?

But even if you don’t believe in a less concentrated distribution of income and wealth on fairness grounds, or that it’s part of what makes a great nation, how do you think an economy can survive when so much of the wealth gets stripped out each year and hoarded or exported?

Posted by KenG_CA | Report as abusive
 

Interesting points, y2kurtus.

I’ve also been mulling over this one the last few days:
http://www.theatlantic.com/business/arch ive/2011/12/when-it-comes-to-taxes-on-th e-poor-the-supply-siders-are-right/25009 9/

At least in some circumstances, earning 40% more may actually result in LESS money. I don’t believe it is moral to reduce what we offer in welfare, but those same benefits create a surprisingly flat standard of living for below-median households. (The benefits are withdrawn at almost the same rate as income grows.)

Posted by TFF | Report as abusive
 

TTF, linking as unreliable a source as McMegan does not help your argument. She tries to validate a theory of marginal taxation with an apocryphal example that mingles marginal taxes with the existing tax code (EITC), Section 8 housing and commuting costs to argue that higher marginal rates on upper income earners is exactly the same. It is most definitely not. See tax revenue under Clinton. She is, as usual, full of it.

Posted by deralte11 | Report as abusive
 

deralte11, read the chart, not the essay.

Do you dispute that withdrawal of the EITC and other benefits results in the highest marginal tax rate at any level of income? I’ve seen multiple studies demonstrating this.

The best solution I can come up with is to extend socialized benefits to higher income levels (especially health care, as the abrupt loss of Medicaid results in a large dip in living standards).

But the present system might not be a complete disaster. I suspect it is most extreme for a single mother with children. Two-parent households will get out of the “flat zone” very rapidly (or will not take advantage of the subsidized child care), and single adults without children have far fewer benefits available to them.

Posted by TFF | Report as abusive
 

If the proposal merely increases the tax rate on taxable income, then it will have only a negligible effect on the truly wealthy. The proposal needs to incorporate a tax on economic income.

Take Warren Buffett. He paid $6,923,494 of tax last year on taxable income of $39,814,784 (17.4%). But his Berkshire Hathaway stock increased by $3 billion, and he will never pay any income tax on this appreciation. So his tax rate on economic income (including unrealized appreciation) was more like 0.2%.

Even if he were taxed at a 100% rate (but only on taxable income), he’d pay tax of $39,814,784, but this would represent only a little more than 1% of his economic income.

I think the only cure is a mark-to-market tax on publicly-traded securities (and derivatives that reference publicly-traded securities). I’ve proposed such a tax for the 1/10 of 1% wealthiest and highest income individuals.

I testified before Congress this month about such a tax.

http://finance.senate.gov/hearings/heari ng/?id=7210f220-5056-a032-5253-25d3c0111 26f

A summary of my proposal is here.

http://www.cadwalader.com/assets/article  /101308MillerTaxNotes.pdf

The full version is here.

http://www.cadwalader.com/assets/article  /120505MillerTaxNotes.pdf

Posted by comment1 | Report as abusive
 

Thoughtful article and comments. But I see no one addressing what I took as your central theme, that the, well, bottom 80 percent in income has no political voice.

I’ll offer the opinion that too many people vote too reliably. Those modeling elections have concluded that a high percentage of people vote in the same way all of the time. That argues that large segments of the population can be more or less ignored (it’s an exercise to the reader as to why this is the case).

Of course, money also plays a big role. While wealth has always had an outsize role in political voice, the costs of running for higher office seem to have fundraising activities flirting with influence peddling. I’m pretty sure that public funding of campaigns causes more problems than it solves, so I don’t really know the answer here.

Posted by Curmudgeon | Report as abusive
 

y2kurtus said “…but how much further than that should society go to close the equality gap between them and the people who built this country?”

I do believe the people who built the country are dead. I also believe that looking down upon “them” without giving a hand up is quite simply wrong. After reading that comment, I wouldn’t wish to know how far society would go to close the gap. Perhaps

“Those people” who are not so worthy in your eyes to have ever “built” America, likely because they are uneducated, have no self esteem and have been the have nots, may wish to better themselves should you actually ask. They just do not know how and have been pushed down rather than helped up.

They are on the perpetual motion machine built by the “haves” and I guarantee you many would like to get off, but perhaps you also believe they should simply get a computer and read a “helpful” article like the one below? That ought to “change their minds!”

Maybe they will become part of the space program! No, silly me, be part of that “strong” national defense program or build the roads for the people who “built” America? Yep, there’s the ticket!

http://www.forbes.com/sites/quickerbette rtech/2011/12/12/if-i-was-a-poor-black-k id/

Posted by youniquelikeme | Report as abusive
 

@ youniquelikeme “I do believe the people who built the country are dead.” Some are some aren’t. Steven King is a near billionare, perhaps the richest man in my poor state. He and his wife have funded the expansion of a bunch of public libraries. He built a little peice of the country.

The previously wealthiest man in my state Harold Alfond, recently died. Several buildings and a dozen scholarships at the University of Maine bear his name. He also started a program where every child born in my small state gets $500 to seed a 529plan for college. He built a little peice of the country.

@KenG_CA… wow so you think less then 2% wish to coast along without contributing…. hummm well the labor force participation rate is 65%… that leaves 35% of working age adults unaccounted for. Call me a cynic if you wish Ken but you give too much credit to your fellow countrymen. There are lots of people who chose not to work… I know at least dozen personally. Think about it hard enough and I bet you do to.

Don’t misunderstand me… I support a strong social safetynet. Just not one so strong that it can carry an able bodied sound minded citizen from birth till death. That is exactly where we stand in Maine, the state with the highest tax burden as a % of income in the country.

Posted by y2kurtus | Report as abusive
 

TTF, I did read the chart and Megan is still a hack. To measure the Laffer Curve effect on an increase in wages, one should look to the marginal tax rate. Congress may have seen fit to have the Section 8 subsidy decrease with increased income but that has nothing to do with the marginal tax rate but it’s in the chart as if it does.
The area in which the exemplar took the job made her commuting costs rise which, again, has nothing to do with the marginal tax rate but it’s in the chart as if it does.
So, Megan and her unnamed economics professors use exogenous variables to try and show the headline (Laffer Curve Vindicated!!!) is correct throughout the entire spectrum of income when it is only true at the very high rates. I can only suppose those professors were either from George Mason or were like her bus rider, that is they existed only as voices in her head.
The essay the typical hack job so I did not read it all and the chart is built on crap. So is the conclusion.

Posted by deralte11 | Report as abusive
 

“Congress may have seen fit to have the Section 8 subsidy decrease with increased income but that has nothing to do with the marginal tax rate but it’s in the chart as if it does.”

Why not? Whether you phrase it as a “tax” or a “withdrawn subsidy”, the net effect is the same — $10k of additional income for a lower-income household results in (maybe) $2k-$4k of spendable cash.

“The area in which the exemplar took the job made her commuting costs rise which, again, has nothing to do with the marginal tax rate but it’s in the chart as if it does.”

No, the chart was not built around the exemplar. It did not take commuting costs into account at all, simply taxes and transfers.

Try building your own chart? Studying the EITC? The structure of housing and child-care subsidies? I can’t vouch for this specific chart, but the marginal rate is absolutely quite high.

Public housing can easily be worth $1000/month. Food stamps are as much as $500/month for families with the least income. And there are cash benefits as well, both at the state and federal level. Don’t forget Medicaid. Between income and benefits, lower-income households are probably living on ~$30k.

It may differ by state, but all of those benefits are withdrawn by the time the household earnings hit $40k. Thus the marginal household benefit from that first $40k of income is clearly quite small.

I’m not about to argue the Laffer Curve, but it would be nice to leave families working to advance themselves a little extra cash in their pocket. Enough to pay for child care and commuting costs, perhaps?

Posted by TFF | Report as abusive
 

KenG, I’m having a surprisingly hard time finding the published number, but a quick calculation from Census tables suggests an aggregate household income of $8.1T for 2009 (working from mean income by quintile).

Dividing the Social Insurance/Medicare by 15.3% suggests that at least $5.5T is subject to the full tax (and yes, I realize that the Medicare tax is not capped). Thus approximately 2/3 of household income is already subject to FICA. The remaining 1/3 is split between pension and Social Security payments, investment income, and (a small piece) income above the $100k cap.

You have also referred to the “deferred earnings” aspect of capital gains, but that would require a redefinition of “income”. Also opens an exceptionally knotty can of worms if you start taxing capital assets that may have increased in value but are not readily convertible into cash.

Posted by TFF | Report as abusive
 

Y2K, come on, that 35% includes mothers who choose to stay at home with their kids.

You ignored my main point, which is to look at the number of people with horrible jobs, they have chosen to take them, just because they want a job. You (and others) only see the relatively few who choose to live on public assistance, rather than take one of those horrible jobs. If the unemployment rate is 10%, right away, that means 90% of the people are working (I don’t accept that the official stats are accurate, but that’s what we’re working with here), and maybe 20% of those who aren’t working are happy that way. That means only 2% of the population is content to live on subsistence.

As for the 12 people you know who are happy not working, well, maybe you need to hang around some other people in case it’s contagious.

TFF, does that household income include capital gains and dividend and interest income?

What deferred income did I refer to? I only suggest taxing realized capital gains.

Posted by KenG_CA | Report as abusive
 

“TFF, does that household income include capital gains and dividend and interest income?”

Took it from the Census statistics on household income. I believe that includes realized capital gains, dividends, and interest. It probably does not include unrealized capital gains.

“What deferred income did I refer to? I only suggest taxing realized capital gains.”

My mistake, then. Sorry. If I had my way, I would tax dividends and (realized) capital gains at normal rates and eliminate the corporate income tax (which is toothless anyways). Would increase overall tax revenues and make it easier for companies to bring cash (and jobs) home.

Posted by TFF | Report as abusive
 

TFF, I agree with you on taxing all income equally, and used to agree with your position on abolishing the corporate income tax. If so many of them weren’t hoarding cash, then no corporate tax would make sense, as it would let income be taxed at the point where individuals get to use it. But so much money is being taken out of the economy by companies accumulating profits, that the tax system needs to be modified to acknowledge and deal with this distortion.

I have seen a stat that says total personal income in 2009 was ~$12 billion, but I cannot find more detail. I also did see that social security grossed over $800 billion in 2009, including interest income (I’m guessing they make a lot of money loaning money to the government), so that implies a much larger base. I would like to find out exactly how much unadjusted gross income there is, because it intuitively seems bigger than even $12 trillion.

Posted by KenG_CA | Report as abusive
 

“But so much money is being taken out of the economy by companies accumulating profits, that the tax system needs to be modified to acknowledge and deal with this distortion.”

Nice thing about that, KenG, is that money is not in short supply. Corporations hoarding it? Then print more! (Known as NGDP targeting.) A vigorous printing program *should* ultimately convince companies to stop hoarding.

The present corporate income tax clearly does not address hoarding, primarily because it is hard to come up with a method of taxing goods that are produced overseas and sold overseas. That is money that must be wheedled home, because the more we threaten the farther away it will move.

Posted by TFF | Report as abusive
 

*should* is right, but it isn’t working, is it? Because it isn’t working, and every other developed economy has debt problems similar or worse than ours, I see no reason to not print more money while it is overvalued.

I don’t have a problem with letting corporations repatriate foreign profits at a low tax rate, or allow them to apply a deduction against them for domestic investment. But it seems silly to have all that money sitting idle. What is the point? It doesn’t benefit shareholders, customers, employees, or the local economies. It’s as if the money doesn’t exist any more, at least not until the company uses it to acquire another foreign company.

Posted by KenG_CA | Report as abusive
 

“*should* is right, but it isn’t working, is it?”

Maybe not letting the printing presses fly fast enough?

“I don’t have a problem with letting corporations repatriate foreign profits at a low tax rate”

Reducing the corporate tax rate to 15% might be enough to encourage repatriation. And there are other ways to tax wholly domestic operations. A sales tax gets around most dodges.

Posted by TFF | Report as abusive
 

TFF, and they can do what Taiwan does and have a national lottery every 3 months based on the numbers at the bottom of your official sales receipt, which cuts down dramatically on under the table sales.

Posted by Danny_Black | Report as abusive
 

@KenG_Ca I’m late getting back to you but I am not ignoring your main point that 10′s of millions of people work undeserible jobs. I agree with you 100% on that.

Now lets see if you will meet me half way… you say that the 35% of the entire adult population 22-65 who choses not to participate in the labor force includes stay at home moms. I’ll grant that as well.

Lets avoid that confusion by just looking at men. The labor force participaton rate for Men is under 70% so how do you explain those away. Are most of those stay at home dads?

…or are you willing to consider that there is SUBSTANTIAL % of working age adults who are disinterested in working.

Posted by y2kurtus | Report as abusive
 

y2k, I think the 70% figure includes students and men over 50-55 or under 25 who cannot just find any job. A lot of these people are living off savings or parents, and I don’t know if they have many options.

There are lots of unemployable people out there who will only get work when there’s a seller’s market, and with unemployment at 9% or more, it’s a buyer’s market. If you were a hiring manager, would you hire someone who is chronically unemployed or somebody who has another job but wants to move?

I just think it is human nature to want to contribute and be part of something. People don’t like to admit they can’t get a job, so they often act like they are getting away with something when they are on unemployment. It absolutely sucks to be unemployed, and everybody has a different way of dealing with it. Then there are the users and takers in society, but I really don’t think they make up more than 2% of the population or so.

But 2% of 200 million is a substantial number of people. Is that half way? :-)

Posted by KenG_CA | Report as abusive
 

@y2kurtus, I think you are looking at these numbers?

http://www.census.gov/compendia/statab/2 012/tables/12s0597.pdf

Note the heading, “noninstitutional population age 16 and over”. That 70% figure includes both Bobby and Grandpa. For the core working years, ages 25-64, it is just under 80%. And I’m quite positive that the 45-64 demographic includes some early retirees as well (some voluntary, some not).

“I just think it is human nature to want to contribute and be part of something.”

It is human nature to want to “be part of something”. But Wall Street is proof that many people couldn’t care less whether or not they contribute.

Mothers of preschool-age kids (ages 0-5) participate in the labor force at a 68% rate (if single) and a 62% rate (if married). Once the kids enter school, both rates push towards 80%. Oddly, in 1990 the labor force participation rate for single mothers with young children was under 50% (the participation rate for married mothers was essentially the same). Is that the influence of the EITC?

Posted by TFF | Report as abusive
 

There are two main classes of US workers. There are what used to be called the working class and the business class, but are now called the non-exempt and the exempt (or hourly versus salaried). They lead very different lives and have very different attitudes, though there was some convergence in the late 60s and through the 70s.

Non-exempt workers are paid by the hour, so employers are extremely conscious of their hourly marginal cost and will cut and spread hours to avoid providing benefits or paying overtime. If you look at the BLS numbers, their work week has been shrinking since the 1950s. It definitely pays to restructure one’s business or automate to eliminate hourly workers.

Exempt workers are paid by the month or some other arbitrary period with no particular constraints on their working hours. It pays to encourage them to work as many hours as possible and, when possible, to take work home with them. According to time use studies, their working hours have been increasing since the 1950s. It definitely pays to keep them off balance and worried about losing their jobs to maximize the number of hours they work, but there is little point in increasing their efficiency.

The social attitudes of the two groups are quite different, but we rarely hear anything from the working class who are invisible to the media save for the occasional buffoon. The fact is, however, that they comprise the majority of workers, and that shows up quite well in this survey. From their point of view, middle class is centered a bit above, of all things, the median income.

Of course, the readers of this blog are largely in the business class, so this number seems surprisingly low.

Posted by Kaleberg | Report as abusive
 

For most people, the term “income” means the money that they earn and use to pay for their current living expenses and (via savings) their future living expenses when they retire. Any significant change in their income means a significant change in the way that they live. For someone who is seriously rich, the connection between income and living expenditures breaks down. If Bill Gates or Warren Buffet make a billion more or less next year; their standard of living will not alter at all. They will not say: “This extra billion means that at last I can afford the new house/boat/car that I have always wanted.”. The issue with taxing income unrelated to living standard comes down to who is likely to make the best decisions on how to spend this money – government officials or the person who made the money in the first place.

Posted by walstir | Report as abusive
 

No, walstir, the question on taxing income comes down to who should pay for the bills we are racking up. Should all share proportionate to their income? Should the rich pay a greater share, since they can do so without hardship? Should we push the bills into the future, leaving our children to pay?

If you want to argue against taxes, cut spending FIRST. Show me a surplus in the budget. At that point I’ll happy consider cutting taxes. Otherwise your argument is simply hot air.

Posted by TFF | Report as abusive
 

Reporting these statistics only contnues an obvious discussion that there is an extreem gap and it is bad. Similarly, when we see a tidle wave it is self evident that it is bad. Knowing how high it is, what color it is, how many people might die, how much distruction it may do, does not further the cause of stopping, reversing or preventing it.

When will we see more helpful reporting, such as, what are proposed solutions and what parts of them are practicable. Reporters no longer do this type of reporting due to hemoginazation of the media, by who else but the 1%ers.

Posted by bladecenter | Report as abusive
 

I think the whole income discussion is misguided – it bundles together people on the make starting from the bottom – say an MD making 200k working 100hrs weeks with 400k in student loans vs wealthy making 200k of investment income on $5m in assets (who for that matter tend to pay less due to lower cap gain taxes, estate taxes etc). Tax system should support social mobility and meritocracy and not cement existing class structure as it seems to be doing and with some of the policies from both left (tax on “rich) and right (“no estate tax, low dividend taxes etc”) it would undermine mobility even more.

It would be great if someone for a change raised this issue – if a young ambitious person is trying to make it society should be helping not hindering the progress, on the other hand, someone with millions in assets can certainly afford to pay more tax than his income would indicate. Wealth tax anyone? Deductions phaseouts tied to wealth not income? Make taxes on capital higher than taxes on earned income?

Posted by KrzysW | Report as abusive
 

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