It is a small average gain from year to year. Now project that same trend out another 60 years, or another 600 years. It's kinda depressing for the 99.9% as they end up with a smaller and smaller percentage of the pie (even if the pie is growing, and even if their incomes and/or standard of living is remaining the same).
It's small gain, year over year. When adjusted for inflation during those years it's even smaller, sub 10%. So they are getting returns which would be equatable to the stock market. This isn't surprising considering most of their net worth comes from the stock market. When the poor and middle class have more access to it stock market it will fall closer in line but that won't happen anytime soon. But I'll explain where I stand at the end of this post ( a viable option to fix this problem).
It just goes to prove that we have a fairly stable system, and it may only take some fairly small adjustments to our system to more evenly distribute the fruits of our economic gains. We don't need massive changes to our tax system, or huge increases in redistribution to insure that all income classes become wealthier at the same rate. Just some modest fine tuning.
Actually to fix it by increasing the tax rates does require massive changes and redistribution..
It's very possible that by just making the bottom few tax bracket rates 0% (note that I am talking about cutting income taxes), and by taxing capital gains and inheritence exactly like we tax other forms of income (maybe even LOWERING the top tax rate on income derived from work), we could create the situation where EVERYONE is growing richer at about the same rate, and possibly do so without slowing the economic gains of the rich.
Yes, your talking about cutting income taxes, I get that. But what you are failing to get is our tax policy already does this in a sense. We tax higher brackets more in Capital Gains, Income and Estate taxes. So nothing would change as we've seen this story before.
Anytime you attack a problem from multiple directions, you don't need to make changes as drastic as if you had attacked it from just one direction. Thats why I advocate doing several minor, although maybe somewhat economically offseting, things at once. By lowering taxes on the worker/consumer class, the net effect is that they get a slightly larger share of the pie after taxes. By lowering the tax on actual work for everyone, then we encourage work (production), and our economy grows the pie. By taxing all forms of income identically (essentially increasing the tax rate on large inheritences and capital gains), we make up for government revenue losses on the tax cuts for earned income. I'd even toss in that we should start phasing out means tested welfare, as welfare disincentivizes people to do productive work, which of course will help increase the size of our aggregate pie while lowering the cost of government.
I get that and don't disagree you need a multiple attack on the issue. I just feel the solutions you have given so far is actually national policy already. The only way to encourage production is not the way of income tax policy but corporate tax policy. That's a different topic. But our growth in the economy pie (be it whatever class) is not based on our national policy but also goes with our trade policy and ability to stay relevant in production (cost to produce). So when we say the poor and middle class are getting screwed, it's because of our corporate tax policy and our input costs in production compared to other countries. So those manufacturing jobs which were stable high earning incomes disappear and are replaced with those service side jobs such as cashier at an Apple store which are and never should be high paying jobs. That is a big piece of the pie people are missing. We don't return to a situation in which manufacturing is good portion of our economy (40%) it will not matter what we do on tax policy.
I rather get rid of welfare in the way we do it now and go to something Singapore does. Where it's heavily means-tested and only about 3,000 of 4m citizens get it. Their policy is SAVE for the future but we'll provide you the ability to get retrained (which I have no problem with). Basically workfare which JP has alluded to in previous topics but slightly different and that's why I disagree with him.
Overall, this plan could be facilitated just as a simplification of our tax code. A fairly large per worker automatic tax deduction, the elimination of all these various tax deductions for special people, and then taxing all income above that amount at the same flat rate.
Well we already do a standard deduction per person. When you say get rid of other tax deductions and increase the standard deduction you aren't changing anything rather you are shifting the "name" of the deduction. I have no problem giving a standard $5,000 deduction per person in household. But after that it's taxable at the flat rate. So we semi-agree here.
The only real difference between my plan and most republican "flat tax" plans is that I insist that all forms income be taxed identically, and I desire a higher exemption amount.
That's fine and I tend to be more on your side on this issue but I disagree on one part. I think, personally, Estates shouldn't be taxed as they are now and I only say this because where I grew up I saw families lose Farms over the estate tax. I think Estates should be treated like as a capital gain. I worked my ass off all my life to leave money and property to kids, that should be taxed at 0% as I already paid taxes on every dollar I earned and had in the estate until my death during tax season. But once my kids receive it, it's value should be assessed and recorded with the local/state Government. That should be the baseline value. Then whatever that value grows, minus what is put in by children via their earned income, should be taxed.
But I think the biggest problem with this income inequality comes to how stocks work now. Be it an IPO or issuing more shares, big players get first dibs. So if you are rich, your broker will see if you want in things like Pandora, Apple, Facebook and so on. You get the stock at the issue price and you get a lot of it. Then regular people get it. I think it should be reversed. I think companies should be offering stocks to their workers to buy first then what isn't sold is sold to the brokers/banks. I think this will make a major difference from my own experience. For example I got about 10,000 shares of Pandora for $16 when issued. It's doubled in 2013/2014. While it floundered for 2 years. I've doubled my investment. Now, I can sell half of it and still hold 5,000 shares and get my investment back and from this point on.. if Pandora keeps going up..or doesn't that's all profit for me. This kind of action should go to the employees, not me. But because of how stocks being issued works, I see all the gain and the workers don't. Which is why I've always given my employees in past companies started and future, 49% ownership in future IPO.
