This is an odd example. Why should it matter if a person's job is digging ditches or being an author? The author still had to work to produce his book. The author is still paying a higher tax rate on his income from selling his book than the ditch digger is on his salary. How is an author's sole contribution to the economy collecting a paycheck?
I was giving a different example. You gave the example of the wage earner, I gave the example of the person who makes their money from investments. The person who earns primarily from investment income pays a far lower tax rate than your hypothetical author and likely less than the ditch digger, particularly if said digger is working a second (or second and third) job to make ends meet and/or has a spouse doing the same thing. Again, why should someone whose sole contribution is going to the mailbox paying a lower rate than ditch diggers and authors?
This high level of wealth inequality is the greatest threat to American power and stability by a wide margin. We're going to destroy ourselves from the inside if it continues much longer.
Yes, while I would not mind an implosion of the system of governance... I would absolutely mind and oppose the pain and heartache that it would create for American people. I think people are underestimating how painful an implosion can be to them individually, and ignoring just how easy it is to alter the course of this journey if they act sooner rather than later. The "1%" can't dictate forever without a strong foundation. The whole thing can collapse if the foundation of the economy continues to have their strength sucked out of them with the assistance of false/deceptive PR campaigns. What I'm seeing from Americans is similar to what you would see in any superpower historically - the notion of even a semi-collapse has become an impossibility in their minds. There is a sense of invincibility. A complete disappearance of fear of misbehaving. Total faith in the ability to correct massive massive errors such as trillion dollar wars or financial crisis. It's almost as though they built a house with a good foundation, and now they have spent decades working on the chandeliers and window frames (stupid issues like contraception and fighting hard for non-action in social security) while the foundation has deteriorated. I sincerely hope something changes, but on some level I wonder if anything other than a collapse will wake the American public up after seeing how passively they reacted to the Iraq war fraud and the robbery which came out of the financial crisis. One of the things which brought America to greatness was the character of its people, the sheer unwillingness to be passive. It appears to me, granted from the outside, that this trait may have been fundamentally altered through years and decades of masterful public relations campaigns. I hope not. I take great inspiration from that trait and that history. I guess that the smallest of flashes occasionally materialize such as Iraq war protests, wikileaks, occupy movement, etc. But these are overwhelmingly insignificant in the grand scale of things. Today the deception is planned such that the **** will not hit the fan within one person's lifetime, so it will require apathy towards future generations to spark action. Coupled with the obscene amount of "care for yourself only" propaganda imposed onto Americans, it is a really really really dangerous formula for 100% of Americans. The only difference is that the "1%" will simply part ways at some point, and go somewhere else with their hoarded assets - I've seen and met wealthy Americans who have nullified their citizenship based purely on their expectation that something like FATCA or increased taxes may be implemented in the future. That's how much those people care about America - as long as it coddles them, they will stay. The moment they are brought to a level playing field, they'll find someone else who wants their money. To occassionally see hard-working Americans of average means arguing for the cause of that "1%" is maddening.
I think the notion is that one already paid income taxes on income earned which then becomes savings which then is invested in which a lower tax is effected upon the gains because they've already paid income taxes on the principal. I think income taxes should be lower as people spend their lives attempting to make more and propel themselves up society. I'm ok with higher estate taxes and a limitation on generational trusts and the like that allow very wealthy people to pay very little tax versus first generation wealthy people that have good incomes but not generational wealth. Eliminating trust loopholes and the tax free transitions in generational wealth is better to normalizing society than income earners which mainly have cash flow but not great deal of actual wealth accumulated.
Income is income, whether invested or earned through wages. Every single dollar is taxed multiple times, so the "its already been taxed" argument is a red herring. Why should people who earn their money pay a higher tax rate than someone who merely sat on their ass and collected investment income? The answer is "they shouldn't," but they have much better lobbyists than those who work for a living.
I get all this. You need to make sacrifices for long term gains. However, wait till you have kids and then your perspective is going to change. Now it's going to come down to a decision about whether one of you should stop working. Unless one of you earns a really high income, having only one parent working is going cripple your ability to invest for the future. The alternative is not that great either. You're going to be stressed out like you have never been before balancing work and kids and with almost no time at all for yourself or each other. All that and still have your savings rate cut in half to pay for childcare.
I have two kids - Childcare costed as much as our mortgage until our first daughter went to kindergarten. We still have another in preschool until next year. However, even during that time we spent extra money on debt reduction instead frivolous things and we continued to keep a minimum in savings for emergencies. We did it without credit cards, and we haven't had a car payment of any kind in over 10 years. We live without debt because we CHOOSE too. We CHOOSE to not go to the movies, we CHOOSE not to go out to eat, take expensive vacations, buy expensive clothes, buy new or fleece..I mean lease cars. We CHOOSE to live below our means in order to get ahead. Remember, there was a time when people ate out ONLY on special occasions, saved up to put a big down payment on a home, and only bought enough clothes to get them through to the next washing - there was a time when people saved instead of spent money without thinking. That was how people used to build wealth - thats how you have teachers and janitors worth millions. It doesn't happen as often today because they'd rather buy the newest $300 game system every year instead of investing that same money.
First apologies, you sounded younger so I assumed you didn't have kids. I agree that it's not impossible to improve your lot in life even today by making the right sacrifices. Still the point that is being made is that it is becoming increasingly harder to do so. If your income is below a certain point then it becomes nearly impossible because you can scrimp and save all you want and there still won't be enough left over to have an appreciable difference in your future. There was also a time when only one parent had to work and the family could still save enough to retire on.
lol, no problems - I'm 40 but I wouldn't mind being younger knowing what I know about money now days. I agree, I just think that threshold is lower than most American think. I also think that the reason most middle class families feel like both parents have to work is due the choices that family makes - 2 car payments, over-buying a house (mortgage payments should not be much more than 1/4 of your take home pay..anyone that says 1/3 is either a bank or a real estate agent), paying outrageous prices for cable/satellite tv, eating out a lot, etc. Think about it, if you didn't have any debt (car loans, student loans, credit cards) or you didn't buy a lot of stuff (XBoxes, cable TV, expensive phone plans, eating out a lot) you'd have a LOT more expendable income. Like I said earlier, I know a lot of families that live on an average salary because 1 parent chooses not to work, and they do fine. As Americans, we're spoiled and we want lots of stuff..but to have lots of stuff means often sacrificing your future for today. Try this - track every dollar you spend for a month (even if its $1.59 for a coke at the store) and you'll be surprised at where your money is going. Then put yourself on a written budget for 3 months and you'll see where you can cut expenses - it really helps. You'll have to adjust it the first couple of months once you see how much and for what you actually spend money. Here's a great budget form I use. (the first page shows you how to use it, the next three are blank for you to use. http://www.daveramsey.com/media/pdf/forms/allocated_spending_plan_form.pdf
How about lowering income taxes for all brackets provided investment income is taxed at the same rate? This will help the middle class build wealth faster. This does nothing for the poor however as most don't pay income tax anyway. So any revenue surplus should go first towards funding social security, healthcare and education.
I agree that we need to raise the capital gains taxes - I'd be happy with them back up to the pre-Bush levels of 19% - but I wouldn't lower all the brackets, I'd just leave them were they are..or let all the Bush tax cuts expire.
Thats really admirable. I think the credit markets have allowed anyone to live as if they're upper class in terms of lifestyle, automobiles, clothes and dining etc. while really not having the income to sustain that lifestyle. The obsession with the lifestyles of the Kardashians, Rappers, Athletes and these modern day heroes etc. has many attempting to emulate that lifestyle while not having the financial ability. The fact that people need an iphone, Starbucks coffee and designer clothes and then not able to save money and gain actual equity is really a disturbing trend in this country. The companies love it as people are afforded credit to consume and consume at the expense of their future. I think the belief that all people are entitled to certain tangible lifestyle items has created a class in debt and in indentured servitude.
thats not what he's saying - you missed the point of his post. He's talking about the excess materialistic spending that has overtaken financial sense in this country. I see people at work all the time who make a lot less than I do driving a much much nicer car than they should be driving. That "I want it Now" attitude is destroying the middle class in this country. We have 2 cars and a house...but we haven't had a car payment in over 10 years..the avg car payment is over $500 these days, thats $6,000 a year that can go to financial security. Savings, investments, etc. The avg car lease is over $13,700 over 3 years - thats a complete waste of money that can be used to build wealth. We have a house..but many people I know that make less or as much as us own a bigger, more expensive house - its not financially smart. At least thats how people USED TO THINK...and thats a large reason why people used to be worth more making less money.
Thanks. Even certain illusions of upper or middle class are really traps to people. The illusion that people must own a home, or must drive a new car or must eat out and have the trinkets that are jammed down our throats by commercials. People's status is caught up in their dress, the trends that will ultimately be the signs of people's financial demise. I think a huge issue is the silly idea of letting anyone despite their qualifications attain a college degree and the government funding to enable that. There is so much federal money backing and loan guarantees that education has inflated more than healthcare in the last 30 years which is leaving a ROI on college lower than ever. So policies to allow people to go to school coupled with policies promoting home ownership have inflated the costs of these items making the final recipients unable to dig out of that debt trap. I think this is driving the age of the Entrepreneur in which an autodidact (self-taught) mantra begins to unfold as conventional eduational systems have failed to produce thinkers but underemployed people with $50,000 in debt that work retail jobs. I'm ok with estate or capital gains taxes being higher, but many people that are first time wealthy have massive debts to pay to get there and are taxed as many generational trusts etc. pay next to nothing. Huge levies on income tax and regulations increase costs and services of all goods and services to ordinary people which limits their ability to pay off debt, maybe one day start a business and do something original. Instead they lead a subsistence life because they keep less of their income and taxes and regulations inflate the cost of living thereby keeping them in debt or in servitude. I believe companies that break monopolies and bring down prices like Wal-Mart are the best thing to happen to poor people.
Your reading comprehension seems to be grade school level, Dr. Know it All. The last sentence in your article. Most of the studies end with people born before 1970, while wage gaps, single motherhood and incarceration increased later. Until more recent data arrives, he said, “we don’t know the half of it.” Maybe not laziness... Maybe shortsightedness "By contrast, young adults who violated all three norms — dropped out, got married before 21 and had children out of wedlock and didn’t have a full-time job — had a 76 percent chance of winding up in poverty and a 7 percent chance of winding up in the middle class." It is counter intuitive, but a lower capital gains tax rate actually increase revenue for the gov. Stock trades are taxed as regular income if held under 1 year. Investors takes tax into equation when calculating return on investments. If the tax rate for capital gains is too high, investors simply hold on to the stock. This increase volatility in stock price as there is less stock liquidity. Reduced rates entices investor to take profit, hence generate revenue for government. Even at the reduced rate, Buffet still hasn't touched the vast majority of his holdings.
People consume what other people produce. Consumption rates have been increasing for the past few decades. It is necessary for savings and the saving rate to go down in order for this to happen. If consumption goes down, savings must increase, and production must decrease. If production decreases then unemployment will increase.
