The Futile Quest for Economic Equality

[midcan5]

again you are free to post something that refutes the numbers.

Would a number convince you? would you change your mind? Let me answer, NO. No, because your view of these things is part and parcel of your makeup, your worldview. I have seen some of the statistics from the information below and they are impressive. When people get up a rung on the ladder, the next step is just a bit easier for them and hopefully their children.

"While poverty has been steadily declining since the last economic recession in the early 1990s, it is still higher than the 1970s, when dramatic reductions in poverty were achieved in the aftermath of the War on Poverty during the Kennedy and Johnson administrations."

Poverty

 

[Zoomie1980]

Would a number convince you? would you change your mind? Let me answer, NO. No, because your view of these things is part and parcel of your makeup, your worldview. I have seen some of the statistics from the information below and they are impressive. When people get up a rung on the ladder, the next step is just a bit easier for them and hopefully their children.

"While poverty has been steadily declining since the last economic recession in the early 1990s, it is still higher than the 1970s, when dramatic reductions in poverty were achieved in the aftermath of the War on Poverty during the Kennedy and Johnson administrations."

Poverty

Only a kool-aide drinker like yourself would quote the worst economic decade outside the 1930's over the past 100 years as a positive......

 

[Agnapostate]

links, data, charts, graphs?

I'll get to it.

This is just retarded. What difficulty?

If you're poor, the government will PAY for you to go to school. And ANYONE can get a student loan.

There's no reason why any person in this country can not receive a higher education.

A ******* bum off the street can fill out a FAFSA and get 0 EFC.

It is notable that the "education" system in the United States serves to indoctrinate students with varieties of "industrial discipline" and serves to enforce a hierarchical workplace and hierarchical work sectors. Are you familiar with the history of compulsory schooling in the United States? Early implementations were based on the authoritarian Prussian model that permitted the Third Reich to rise.

 

[Skull Pilot]

Would a number convince you? would you change your mind? Let me answer, NO. No, because your view of these things is part and parcel of your makeup, your worldview. I have seen some of the statistics from the information below and they are impressive. When people get up a rung on the ladder, the next step is just a bit easier for them and hopefully their children.

"While poverty has been steadily declining since the last economic recession in the early 1990s, it is still higher than the 1970s, when dramatic reductions in poverty were achieved in the aftermath of the War on Poverty during the Kennedy and Johnson administrations."

Poverty

You mean just there are as a studies and statistics you refuse to believe because they don't jive with your world view?

FYI since you probably didn't bother to read the links I posted before you summarily dismissed the information, the quintile mobility numbers were from the Census Bureau, not some biased think tank.

I seem to remember the 70s as a time of high inflation and double digit unemployment. Is that what it takes to abolish poverty?

The fact is that the 6, 11, 15, 21 and 47% quintiles are constant in countries regardless of their index of economic freedom and irrespective of the individual wealth of those countries. Explain that away.

Two Americas: One Rich, One Poor? Understanding Income Inequality in the United States

The simple statement that the more freedom people have, the more economic freedom, the better off they are. That economic freedom allows one to move up economically.

Even if some choose to remain stuck at the bottom, where really there is nothing holding back a normal, healthy individual, those at the bottom still benefit because as income and standards of living rise for all, theirs will as well.

 

[editec]

Inclined to Liberty: The Futile Attempt to Suppress the Human Spirit

Chapters 13 and 14

The author cites a very interesting study, Economic Freedom of the World 2005, by the Fraser institute


The study reports that regardless of the degree of economic freedom, the index of which is based on the degree of personal choice, freedom of voluntary exchange, protection of person and property, the right to keep earnings and th e freedom to enter and compete in markets, among 128 countries 9comprising 93% of the world's population), the percentage share of income by quintiles from 1998-2002 remained about the same in each country.

Let's start by asking ourselves this: do reported incomes REALLY indicate incomes for every quintile?

I say they do not.

I say that those figures, become increasingly irrelevant to actual incomes and wealth, the further up the income range one goes.

I suggest to you that, thanks to a very complex and classist bias in our taxation system, most income of the wealthy and the vast majority of income of the very wealthy is actually never reported, or at best reported AFTER the wealthy retires.

And as tax system vary wildly, the Fraser report becomes essantially meaningless since it does not say it takes any those differences of taxation by nations into account.

Let me give one real life American example of deferring incomes that skew the numbers, shall I?

It is not at all uncommon to run into people who have large tax-deferred accounts. Multimillion-dollar IRAs are usually the result of rollovers from 401(k)s or other company retirement plans.

Some wealthy individuals have no need for these tax-deferred accounts, as they have other sources of retirement income. I was contacted by such an individual, whom I'll call Vincent, a few weeks ago through his accountant.

Vincent, who is in his 60s, has substantial wealth.

With $50 million "in the bank," and $2 million of annual income, he has little need for his $2.5 million IRA. After he retires, his $500,000 annual expenses will be covered by his investment portfolio.

Vincent knows that withdrawals from the IRA are subject to income taxes. And, that the IRA will be counted as an asset in his estate for estate tax purposes. As such, he will burden his two children who are his IRA beneficiaries (50:50) with the potential for double taxation.

Vincent's children will not receive a "step-up" in basis when they inherit the IRA. Plus, they will pay income taxes on any withdrawals they take from the IRA.

Let's assume that each child wanted to withdraw his share of the IRA to buy a house.

If the IRA were valued at $5 million at Vincent's death and each child withdrew his half share at the time, each child would need to report $2.5 million of taxable income on his IRS Form 1040. In contrast, if each child inherited $2.5 million in stocks held in a taxable brokerage account (not tax-deferred), there would be no taxable income or capital gain to report if the child wanted to sell the stock to free up cash to by a home.

In a taxable account situation, the taxes work like this: Assume that Vincent purchased the stocks at $5 a share and worth $10 a share at his death. Assume the kids sold the stocks at $10 a share. Because of the "step-up" in cost basis, the kids' cost basis is $10 not $5. (The $5 would be the cost basis but for the step-up.) When they sell their shares at $10, they have no taxable gain. (The $10 selling price minus $10 cost equals zero capital gain.)

We're talking about two different tax structures here: A tax on the gain on the sale of the stock (taxable account) and a tax on income created by a withdrawal (IRA). Not to confuse the issue, if Vincent owned the same stocks in the IRA, the children could sell them with no tax consequences if they did not make a withdrawal. It's the withdrawal that triggers the income tax liability.

Keep in mind that IRA beneficiaries cannot avoid some withdrawals - beneficiaries are required by law to take required minimum distributions after the death of an IRA owner.

So, for someone like Vincent, a large IRA may actually be a burden, not a benefit.

Vincent wants to withdraw the funds from the IRA now, pay taxes now, and invest the proceeds outside of the tax-deferred environment.
Given that tax scenario, there is a better solution.

Since Vincent is prepared to pay income taxes on a $2.5 million IRA withdrawal, it's a no-brainer to do one better.

Wait until 2010 and convert the IRA to a Roth IRA. Why 2010? That's the year in which anyone, no matter how much they make, can establish or convert to a Roth IRA. (Currently, there are income limits that prohibit higher earners from setting up or converting to a Roth IRA.)

By converting to a Roth IRA, the account becomes tax-free instead of tax-deferred.

Plus, after a waiting period, Roth IRA money can be withdrawn tax-free by the IRA owner, Vincent, and by his beneficiaries.

After the conversion and after the waiting period, no income taxes are due or payable by either Vincent or the children after they inherit the Roth IRA.

The Roth IRA is, however, still considered part of Vincent's estate for estate tax purposes. And, the beneficiaries (not the IRA owner) are required to take distributions after they inherit the Roth, but the distributions are tax-free.

source

Now imagine that some significant percentage of the the upper quintile can take advantage of sort of highly complex estate planning that only the wealthy can take advantage of.

What does that really do to the posted income distributions by quintiles?

It WILDLY underreports the incomes of that uppermost quintile, doesn't it?

And bear in mind the above is but one of thousands of such tax avoidance schemes that are avialble pretty much ONLY to the rather affluent in AMERICA.

The fact is that the whole incomes reporting game (at least regarding America) is about as accurate a picture of how bad it really is, as our CPI is a specious report of actual inflation, or our unemployment numbers are wilding underreporting the true nature of the employment picture in the USA

Countries with greater freedom had higher per capita incomes but irrespective of the average level of per capita income of a country, the percentage distrubution of income for ascending quintiles settled out at approximately 6%, 11%, 15%, 21% and 47%.

I find this an interesting finding, but again, I am highly dubious that findings are meaningful given that different government's which have extremely different tax laws.

Remember that those incomes are the reported incomes AFTER ALL THE TAX GAMING THAT ONLY THE AFFLUENT CAN REALLY DO GETS DONE.

These figures seem to indicate that income quintile tiers are a natural distribution much like a bell curve and remain largely unchanged in terms of percentage regardless of the attempts to equalize them.

A Bell curve? How can the numbers of wealth distribution broken down by quintilesof income earners be described as a bell curve when the outcomes of income distribution by quintile read:

6%, 11%, 15%, 21% and 47%​

Perhaps I am missing the author's point? Where's the bell curve?​

The caveat of these numbers is that they are but a mere snapshot of a population at any given time and it is easy to assume they are static. that is that the people in the lower quintile are a fixed group.

I do not assume they are static. I assume they are sticky.

This is not true however. We see that the lowest quintile of earners has the least number of people

Okay, this makes like ZERO sense.

The quintiles each represent 20% of all income earners. The lowest qunitile is 20% of incomes earners as is EVERY quintile that follows.

and also the youngest people as should be assumed. income mobility or the freedom to move up in the quintile tiers make income gaps even more meaningless.

Yes, there is economic mobility for most income earners, that is certainly true.

The real question is how much mobility and for how many?

We can assume all we want but can we find outcomes over lifetimes which give a the true picture of class mobility?

I see nothing here that gives us those numbers

Econ 309 Home Page (lecture 13 Economic Myths and reality)

The above lecture details that in the US only 5% of those in the lowest quintile in 1975 were still in the same quintile in 1991.

By 1991 59.3% of those people had mobilized to occupy the top 2 quintiles, while 35.6% mobilized to the second and third quintiles.

I'd would dearly love to see those numbers and I would dearly love to see the methodology this author used to find them, too.

Let's just say that I seriously doubt if 6 out of ten people starting out with incomes in the lowest quintile ended up 16 years later in the upper two quintiles.

take the natural quintile distribution tiers and the fact of income mobility into account and one can safely say the statement,

Interest words...what do they mean? They don't mean anything, but merely beg the question

"The rich are getting richer and the poor are getting poorer"

is utterly false.

Yes the numbers regarding the wealth of the rich v the wealth of the poor continue to show us that is true, even though even the IRS admits that when it comes to the top 1-2% even THEY don't have a real picture of actualy WEALTH (as opposed to reported incomes)

Any attempt to attenuate the higher quintlies incomes only results in a depression of income over all quintiles with the relative percentages remaining about the same.

Nothing in the above proves that to be true.

It might be, but nothing in the above remotely proves that, or for that matter even suggests it might be true.

The final statement is pure conjecture.

 

[Care4all]

right, there is NO WAY that 6 out of 10 made it to the top two quintiles from the bottom quintile.

UNLESS, these people were considered in the bottom quintile while they were earning minimum wage, waiting tables, while getting their Harvard, princeton, Cornell, MIT, U of M medical, degrees....etc.?

 

[Skull Pilot]

Let's start by asking ourselves this: do reported incomes REALLY indicate incomes for every quintile?

I say they do not.

I say that those figures, become increasingly irrelevant to actual incomes and wealth, the further up the income range one goes.

I suggest to you that, thanks to a very complex and classist bias in our taxation system, most income of the wealthy and the vast majority of income of the very wealthy is actually never reported, or at best reported AFTER the wealthy retires.

ALL income is reported eventually so it doesn't matter when it is reported. The income quintiles do not specify whether the income is from retirement accounts or from a job.

And as tax system vary wildly, the Fraser report becomes essantially meaningless since it does not say it takes any those differences of taxation by nations into account.

The numbers used, I believe were irrespective of taxation.

Let me give one real life American example of deferring incomes that skew the numbers, shall I?




source

Now imagine that some significant percentage of the the upper quintile can take advantage of sort of highly complex estate planning that only the wealthy can take advantage of.

When one converts a traditional IRA to a Roth IRA, one pays taxes on all the contributions made to the traditional IRA as part of the conversion. You left that part out of your example didn't you?

What does that really do to the posted income distributions by quintiles?

It WILDLY underreports the incomes of that uppermost quintile, doesn't it?

I say it actually reduces the amount of wealth in higher quintiles because the tax rates are higher than those for lower quintiles.

And bear in mind the above is but one of thousands of such tax avoidance schemes that are avialble pretty much ONLY to the rather affluent in AMERICA.

The tax is not avoided in an IRA conversion because one pays the tax on the contributions that one would have paid if the IRA was a Roth from day one. And since one can only make a Roth conversion IF the modified adjusted gross income of the owner of the IRA is less than 100K, your "tool of the super rich" theory falls apart.

Roth IRA Conversion Considerations

And people with a MAGI of over 166K if married and 114K if single are not eligible to open a roth IRA at all.
Roth IRAs: Eligibility Requirements

The fact is that the whole incomes reporting game (at least regarding America) is about as accurate a picture of how bad it really is, as our CPI is a specious report of actual inflation, or our unemployment numbers are wilding underreporting the true nature of the employment picture in the USA

So all data and inferences from data collected on income is false or unreliable at best. Even yours?

So tell me Ed why do you bother?

A Bell curve? How can the numbers of wealth distribution broken down by quintilesof income earners be described as a bell curve when the outcomes of income distribution by quintile read:

6%, 11%, 15%, 21% and 47%​

Perhaps I am missing the author's point? Where's the bell curve?​

I didn't say it WAS a bell curve I SAID it seems to be a natural distribution like a bell curve is a natural distribution.

do not assume they are static. I assume they are sticky.



Okay, this makes like ZERO sense.

The quintiles each represent 20% of all income earners. The lowest qunitile is 20% of incomes earners as is EVERY quintile that follows.

Two Americas: One Rich, One Poor? Understanding Income Inequality in the United States

The number of people in each quintile is not equal

When decision-makers, journalists, and the public view the government's official income distribution figures, there is a common and implicit assumption that the quintiles contain equal shares of the population. After all, the notion that we should measure "inequality" by comparing the aggregate income of groups that are themselves unequal in size is at best confusing. However, as noted, the official Census income "quintiles" do not contain equal shares of the population, and this fact skews the Census' measure of income distribution.

While the middle quintile does contain roughly one-fifth of the population, the others do not. The high disparity in population between the highest and lowest income quintiles is of particular interest. The top quintile contains 24.6 percent of the population, but the bottom quintile contains only 14.3 percent. In raw numbers, there are 69.4 million persons in the top quintile compared to 40.3 million in the bottom. Thus, for every person in the lowest quintile there are 1.7 persons in the top quintile. This imbalance in population is a major factor contributing to the apparent levels of inequality in Census Bureau figures.

Yes, there is economic mobility for most income earners, that is certainly true.

The real question is how much mobility and for how many?

We can assume all we want but can we find outcomes over lifetimes which give a the true picture of class mobility?

I see nothing here that gives us those numbers

Econ 309 Home Page (lecture 13 Economic Myths and reality)

I can't cut and paste from the doc as it is read only but on page 3 the table titled "Income mobility 1979 to 1991 (PSDI data UM Study) is the one.

By 1991 59.3% of those people had mobilized to occupy the top 2 quintiles, while 35.6% mobilized to the second and third quintiles.

I'd would dearly love to see those numbers and I would dearly love to see the methodology this author used to find them, too.

Let's just say that I seriously doubt if 6 out of ten people starting out with incomes in the lowest quintile ended up 16 years later in the upper two quintiles.

This is where certain assumptions get you in trouble. You assume that all things are equal among quintiles but that is not true. Again from the Heritage Foundation link

figures are flawed by the exclusion of taxes and social safety net spending and by the fact that the "fifths" do not contain equal numbers of people. Adjustment for these factors radically alters the picture of income distribution: The top fifth of the population has $4.21 of income for every $1.00 at the bottom.

The remaining inequality in society is heavily influenced by the lack of work at the bottom. If working-age adults in the lower quintiles worked as much as their higher-income counterparts, the income disparity of the top to the bottom quintiles would fall to $2.91 to $1.00.

Not only are there unequal numbers of people in each income quintile, those people do not equal hours in each quintile.


the conclusion of the Heritage article:

Still, the top fifth of U.S. households (with incomes above $84,000) remain perennial targets of class-warfare enmity. These families, however, perform a third of all labor in the economy. They contain the best educated and most productive workers, and they provide a disproportionate share of the investment needed to create jobs and spur economic growth. Nearly all are married-couple families, many with two or more earners. Far from shirking the tax burden, these families pay 82.5 percent of total federal income taxes and two-thirds of federal taxes overall. By contrast, the bottom quintile pays 1.1 percent of total federal taxes.12

In one sense, John Edwards is correct: There is one America that works a lot and pays a lot in taxes, and there is another America that works less and pays little. However, the reality is the opposite of what Edwards suggests. It is the higher-income families who work a lot and pay nearly all the taxes. Raising taxes even higher on hard-working families would be unfair and, by reducing future investments, would reduce economic growth, harming all Americans in the long run.

 

[Skull Pilot]

right, there is NO WAY that 6 out of 10 made it to the top two quintiles from the bottom quintile.

UNLESS, these people were considered in the bottom quintile while they were earning minimum wage, waiting tables, while getting their Harvard, princeton, Cornell, MIT, U of M medical, degrees....etc.?

That's exactly right.

While people are in school and reporting income they may well be in the bottom quintile and 10-15 years after graduating they will almost assuredly be in a higher quintile no?