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Posts tagged income inequality

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No less an authority than the Internal Revenue Service reports that at least 10,080 households with gross incomes of over $200,000 paid nothing at all in income taxes in 2009. (OK, that doesn’t literally put them all in the top 1 percent, but pretty close.) Those high earners are not (necessarily) breaking any laws—just taking clever advantage of a panoply of tax deductions. They’re also ducking the alternative minimum tax, which, as Bloomberg explains, “was created in 1969 in response to a report that 155 people earned $200,000 and paid nothing in taxes.” The horror.
Vince Beiser, Ten thousand households earning over 200,000 paid no income taxes in 2009.

Filed under Income Taxes income inequality income disparity taxes

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Increased debt due to income stagnation, not increased borrowing or consumption;

It’s a well-known fact that household debt has exploded in recent decades, rising from 50 percent of GDP in 1980 to over 100 percent on the eve of the Great Recession. It’s also well-known that household borrowing has increased sharply over this period. Indeed, for most people — including many economists — these are two ways of saying the same thing. In fact, though, they are quite different claims, and while the first one is certainly true, the second is not.
How can debt have increased if borrowing hasn’t? Though this seems counterintuitive, the answer is simple. We’re not interested in debt per se, but in leverage, defined as the ratio of a sector’s or unit’s debt to its income (or net worth). This ratio can go up because the numerator rises or because the denominator falls…
Think of it this way: If you borrow money and your income in dollars rises by 10 percent a year (3 percent real growth, say, and 7 percent inflation) then you will find it much easier to pay off the debt when it comes due. But if you borrow the same amount and your dollar income turns out to rise at only 4 percent a year (the same real growth but only 1 percent inflation) then the payment, when it comes due, will be a larger fraction of your income. That, not increased household spending, is why debt ratios rose in the 1980s.
Neither the 1980s nor the 1990s saw an increase in new household borrowing — on the contrary, the household sector in the aggregate showed a primary surplus in these decades, in contrast with the primary deficits of the postwar decades. So both the conservative theory explaining increased household borrowing by shorter time horizons and a general lack of self-control, and the liberal theory explaining it by efforts of those further down the income ladder to maintain consumption standards in the face of a falling share of income, need some rethinking. 

Chart courtesy of Mother Jones. Above, J. W. Mason takes out the popular misconceptions that the debt increase is due to increased borrowing or increased consumption. In reality, the consumption and borrowing hasn’t changed significantly- it’s the stagnation of income that has caused the issue.

Increased debt due to income stagnation, not increased borrowing or consumption;

It’s a well-known fact that household debt has exploded in recent decades, rising from 50 percent of GDP in 1980 to over 100 percent on the eve of the Great Recession. It’s also well-known that household borrowing has increased sharply over this period. Indeed, for most people — including many economists — these are two ways of saying the same thing. In fact, though, they are quite different claims, and while the first one is certainly true, the second is not.

How can debt have increased if borrowing hasn’t? Though this seems counterintuitive, the answer is simple. We’re not interested in debt per se, but in leverage, defined as the ratio of a sector’s or unit’s debt to its income (or net worth). This ratio can go up because the numerator rises or because the denominator falls…

Think of it this way: If you borrow money and your income in dollars rises by 10 percent a year (3 percent real growth, say, and 7 percent inflation) then you will find it much easier to pay off the debt when it comes due. But if you borrow the same amount and your dollar income turns out to rise at only 4 percent a year (the same real growth but only 1 percent inflation) then the payment, when it comes due, will be a larger fraction of your income. That, not increased household spending, is why debt ratios rose in the 1980s.

Neither the 1980s nor the 1990s saw an increase in new household borrowing — on the contrary, the household sector in the aggregate showed a primary surplus in these decades, in contrast with the primary deficits of the postwar decades. So both the conservative theory explaining increased household borrowing by shorter time horizons and a general lack of self-control, and the liberal theory explaining it by efforts of those further down the income ladder to maintain consumption standards in the face of a falling share of income, need some rethinking. 

Chart courtesy of Mother Jones. Above, J. W. Mason takes out the popular misconceptions that the debt increase is due to increased borrowing or increased consumption. In reality, the consumption and borrowing hasn’t changed significantly- it’s the stagnation of income that has caused the issue.

Filed under debt income inequality

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Income Inequality Breaks Down Rule of Law

One of the central characteristics of highly unequal societies is that two sets of laws develop: One set for the rich and powerful and one set for everyone else. The more unequal societies become, the more easily they accept the unacceptable, and with each unrebuked violation, the powerful actors at the top of the society gain an ever greater sense of entitlement and an ever greater sense that the laws that govern everyone else don’t apply to them. As a result, their behavior becomes increasingly egregious.

I would suggest that the robo-mortgage scandal is a strong indicator that this type of unequal justice is now becoming ever more commonplace in America. Past bank abuses are typically discussed without a sense of outrage. They have, in effect, become a recognized practice of deception with no consequences. Here are three prominent examples from the past few years:

First, the robo-mortgage scandal was discovered. As powerful members of society, the banks effectively decided what laws they wanted to follow and disregarded others. The banks claimed that their violations were technical and harmed no one. Nonetheless, the activities of the banks constituted massive fraud, perjury, and conspiracy. Bank officials have testified in court that they filed as many as 10,000 false affidavits a month. These are effectively undeniable admissions of law-breaking on a massive scale.

It’s a federal crime, punishable by up of five years of imprisonment, to knowingly file a false affidavit with the court. From the perspective of the law, you are guilty of the same perjury when you falsely testify in court or when you submit a false affidavit. In most states, filing false affidavits with the court similarly constitutes a felony offense of perjury.

If an individual citizen perpetrated this kind of massive perjury, he or she would be prosecuted. For illegal activities to take place on this type of massive scale, other serious crimes, such as conspiracy, are undoubtedly committed as well.

The banks committed very clear, easily provable crimes by transferring property titles that they didn’t own- stealing from homeowners, and lying to the court about it.  The only consequence they face for these crimes is the “settlement” that affords for less than a $2,000 per loan file fine- not bad for a felony offense that can normally result in five years in prison.

That’s assuming that the banks even comply with that much. Gretchen Morgenson at the New York Times details how Banks often simply forgo their end of settlements:

[T]wo years of statistics, through last September, show 5,771 cases where mediators found that banks had failed to participate in good faith or were not complying with other aspects of the mediation law. That is equivalent to 42 percent of all the mediations completed in the [Foreclosure Mediation Program in Nevada].

This is in addition to other bank fraud settlements in Nevada that Bank of America violated with what appears to be complete impunity. We have two sets of rules now; one of the wealthy and one for the rest of us.

Filed under income inequality wealth inequality rule of law

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Chomsky—in his politics as in his linguistics—is a rigid structural determinist. This means that he tends to give priority to the forces of order, structure, and control. Ironically, for such a well-regarded social activist, this leaves very little room for people to engage in resistance or to appropriate the means of communication (at least without wholesale revolutionary change). Chomsky’s grim view of broadcast media is, arguably, a simplification of Adorno and Horkheimer’s gravely pessimistic treatise on the culture industry—still read by most undergraduate social science majors. Chomsky makes what is, basically, an epistemological claim: those in the ownership class will inevitably use the means of communication at their disposal to produce an ideology that reinforces their own privileged position in the world. The financial/political elite are best able to pursuit their own interests when the masses are distracted and passified.
Chomsky on Social Media (via azspot)

(via azspot)

Filed under chomsky income inequality wealth inequality class

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underthemountainbunker:

Top 1% of taxpayers receive more income than entire bottom half combined
From the Center on Budget and Policy Priorities:

Tax policy should lean against the rising tide of income inequality, not exacerbate it. During the first three decades after World War II, economic growth was  robust and widely shared: economy-wide productivity improvements were  accompanied by significant increases in the living standards of most  Americans. In recent decades, by contrast, the benefits of economic  growth have not been widely shared. CBO data show that between  1979 and 2007, the average after-tax income of the top 1 percent of  Americans grew by 281 percent, after adjusting for inflation, compared  to just 25 percent for the middle 20 percent of Americans, and ­­16  percent for the poorest fifth of the population.[13]
The tax cuts enacted in 2001 and  2003 provided the largest benefit to the highest-income households and  widened these yawning income disparities. Under these tax cuts,  households with incomes over $1 million stand to receive an average tax  cut of $130,000 in 2012, according to the Tax Policy Center, equivalent  to an increase of 6.3 percent in their after-tax income. Meanwhile,  households in the middle of the income spectrum will receive tax cuts  that equal 2.3 percent of their income. Households in the bottom  quintile will receive an average increase in income of less than 1  percent. [14] (See Figure 3.)

Summary: after tax incomes from Bush’s tax cuts:
Households > $1 million: increase of 6.3%
Households in middle income: increase of 2.3%
Households in bottom quintile: increase of < 1%

The GOP has been actively engaged in bottom-to-top income  redistribution. And because of God, guns, and gays, the fundamentalist  teabaggers will vote for it — despite their own precarious financial  situation.
Want it to stop? Vote next time.
via: @allisonkilkenny

Member this the next time someone complains about the poor paying no income taxes: they have so little income to pay from that it only makes sense.

underthemountainbunker:

Top 1% of taxpayers receive more income than entire bottom half combined

From the Center on Budget and Policy Priorities:

Tax policy should lean against the rising tide of income inequality, not exacerbate it. During the first three decades after World War II, economic growth was robust and widely shared: economy-wide productivity improvements were accompanied by significant increases in the living standards of most Americans. In recent decades, by contrast, the benefits of economic growth have not been widely shared. CBO data show that between 1979 and 2007, the average after-tax income of the top 1 percent of Americans grew by 281 percent, after adjusting for inflation, compared to just 25 percent for the middle 20 percent of Americans, and ­­16 percent for the poorest fifth of the population.[13]

The tax cuts enacted in 2001 and 2003 provided the largest benefit to the highest-income households and widened these yawning income disparities. Under these tax cuts, households with incomes over $1 million stand to receive an average tax cut of $130,000 in 2012, according to the Tax Policy Center, equivalent to an increase of 6.3 percent in their after-tax income. Meanwhile, households in the middle of the income spectrum will receive tax cuts that equal 2.3 percent of their income. Households in the bottom quintile will receive an average increase in income of less than 1 percent. [14] (See Figure 3.)

Summary: after tax incomes from Bush’s tax cuts:

  • Households > $1 million: increase of 6.3%
  • Households in middle income: increase of 2.3%
  • Households in bottom quintile: increase of < 1%

http://www.cbpp.org/images/cms//9-27-11tax-f3.jpg

The GOP has been actively engaged in bottom-to-top income redistribution. And because of God, guns, and gays, the fundamentalist teabaggers will vote for it — despite their own precarious financial situation.

Want it to stop? Vote next time.

via: @allisonkilkenny

Member this the next time someone complains about the poor paying no income taxes: they have so little income to pay from that it only makes sense.

Filed under politics class war income redistribution unemployment vote! war on the middle class botton-to-top income redistribution Bush's tax cuts Center on Budget and Policy Priorities GOP income inequality Republicans spending cuts for the rest of us tax cuts for the wealthy tax policy tea party

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A new report by the Washington Post on “Breakaway Wealth” contains new research by economists Jon Bakija, Adam Cole and Bradley T. Heim, who analyzed tax returns from the top 0.1 percent of earners in the U.S. That top percentile takes home more than 20 percent of the personal income in the country, and their average income is $5.4 million. The average income of the bottom 90 percent, according to the Post, is just $31,244.

The news that the income gap is growing in the United States is probably not news at all to most working people. But this data throws the trend into sharp relief. Surprise, surprise, they’re mostly not media personalities or athletes (just 3 percent). They’re chief executives and managers (41 percent), and of course they work in finance (18 percent)—the same executives who are benefiting nicely from policies that have favored the rich and tilted the playing field in their favor, maintaining low personal and corporate tax rates and in some cases actually bailed their companies out with government funds.

Executive pay has been heading sharply upward since the 1970s, but at the moment the gap looks especially ugly as unemployment stagnates and real wages decline, as conservatives attack union pay and benefits and Congress has Social Security, Medicaid and Medicare in its sights.

Moreover, it’s not an inevitable result of the invisible hand of the free market. The Post writes:

“What the research showed is that while executive pay at the largest U.S. companies was relatively flat in the ’50s and ’60s, it began a rapid ascent sometime in the ’70s.

As it happens, this was about the same time that income inequality began to widen in the United States, according to the Saez figures.

More importantly, however, the finding that executive pay was flat in the ’50s and ’60s, when firms were growing, appears to contradict the idea that executive pay should naturally rise when companies grow.

This is a ‘challenge for the market story,’ Frydman said.”

The Post offers one other possible explanation. Economists theorize that the “social norms that once reined in executive pay” are gone. A dairy executive the Post lovingly describe from the 1970s turned down raises several times, saying that he made enough money. There are few such protestations from today’s multimillionaires.

We got the New Deal during the Great Depression, let’s not forget, less because we had benevolent overlords than because the wolves were at the door. Communism had come to Russia; unions were strong and many run by socialists themselves. The New Deal was a compromise position between the threat of communism, organizing by progressive and socialist activists aligned with labor, and the pushback from business. And during the ’50s and ’60s, while executive pay was less exorbitant, those New Deal programs were still strong and unions had organized over 30 percent of the workforce. (Even now, the median wage for union workers is more than $10,000 a year more than non-union.)

Those “social norms” started to change in the 1970s as union density dropped and business fought back hard against the New Deal. They began to change fast in the ’80s, with Reagan’s deregulation-first agenda—in 1980, CEOs made 42 times what workers made; now it’s 343 times. This, coupled with the failures of communism in practice, led to what British author Mark Fisher calls “capitalist realism” — the idea that there is no alternative and so we’re stuck with what we’ve got. It might not be fair that the company CEO makes hundreds of times your salary, but that’s the way the system is, and it’s the best system we’ve got.

CEO of Walmart Makes in One Hour What the Average Employee Makes In a Year: How Skyrocketing Inequality Is Hurting America | | AlterNet

Your daily #classwar.

(via champagnecandy)

(via champagnecandy)

Filed under income inequality class war

360 notes

motherjones:

Productivity has surged, but income and wages have stagnated for most Americans. If the median household income had kept pace with the economy since 1970, it would now be nearly $92,000, not $50,000.
Plus, 11 other charts that would really piss you off…if you had time to read them.

This is what I think of when people tell me that certain social services or policies would be bad to our GDP. Most Americans won&#8217;t notice, even a little.

motherjones:

Productivity has surged, but income and wages have stagnated for most Americans. If the median household income had kept pace with the economy since 1970, it would now be nearly $92,000, not $50,000.

Plus, 11 other charts that would really piss you off…if you had time to read them.

This is what I think of when people tell me that certain social services or policies would be bad to our GDP. Most Americans won’t notice, even a little.

(via orbitingasupernova)

Filed under income inequality