Wealth and Income Inequality

[Nautiknight]

you are replying to one of the most disingenuous people on this board. not only that he is prone to lashing out and saying some pretty terrible things. i think most people generally disregard what he has to say.

I try to only visit the water cooler every now and then. I am ignorant of most here. Lol. I have worked for a wide variety of organizations. I have studied history and applied 50 years of living , a fine UCF education and formulated my ideas based on experience. I tend to treat people with respect because one thing I have learned , we all have a story. We don't know people's struggles , we don't know their lives. I can disagree with a person and still walk away being nice. Life is hard. It's hard for most here and I get it. Thanks for the heads up. Lol.

 

[Crazyhole]

Crazy, you're spot on. Here is the thing, the founders understood tyranny because they lived it first hand. The government is force. It's power and the government can remove our rights and toss us in jail. Contrasts this to the market where we have choices. U may find Wal Mart labor practices repulsive and I can say, hey I don't like Walmart and there is not a damn thing Walmart can do to my liberty. I

I find GMs $49 billion bailout disgusting and I hate that company. I will never buy a GM product because they are huge hypocrites. They take tax money to save their sorry butt and then turn around and build factories in Mexico and China. Screw that. That's a huge wealth transfer through crony capitalism. GM can rot in hell.

If you want wealth to filter down then stop taxing wealth. Stop penalizing investment. I would love to hand my wealth down to my kids but when government swoops in says pay me 39% for your gains, well the 39% less I can give to my kids. Here is something for you to consider. Let's say I sell all my real estate in 10 years for $2 million dollars.

For discussion purposes the cap gains on it will be around $780,000! That's a crap load of money! I love boating and my disabled son loves boating. My dream boat is a Grady White Express 330. New that boat sells for around $450,000. When the government confiscates that $780,000 they essentially take enough money for me to buy almost 2 Express 330s. So. When I buy that boat, I support Grady White, The dealer, Yamaha outboards, Garmin, Taco outriggers, all the companies who sold Grady the parts. So, in my decision to either invest the gain or blow it, I decide what's best for me and my family, not the government. When the government confiscates wealth it erodes it plain and simple.

At my very core I trust everyone reading this thread that YOU KNOW what's best for YOU not me, and damn sure not the government. Keep wealth moving by stop penalizing it, stop taking it when people die and allow people to simply run their lives.

I think you hit on the core issue. Our tax laws do not encourage spending, they encourage people to reinvest your gains into something that you can defer the taxes on indefinitely and let your wealth growth perpetuate itself. We need to figure out a way that people look at their situation and see that a purchase of something they enjoy is just as valuable as reinvesting because there is no advantage either way.

 

[Crazyhole]

We have a tax code that wasn't designed for the shift in scale that companies are now able to achieve. Thats caused us to see the increasing speed at which wealth is consolidating at the top. Meanwhile as were allowing the ultra rich to keep more and more wealth our deficit is the highest its ever been spreading that burden to the entire population when we should just be collecting taxes.

Republicans always talk about "free stuff" but allowing people to pay no taxes when the country doesn't have a balanced budget is just "free stuff" for the rich. Its a free loan to be paid off by US citizens at a later date.

Tell me, if we were to increase taxes on the rich just for the sake of balancing the budget, how will that improve the lives of the middle and lower classes? We unfortunately are still funding the budget through borrowing, so why aren't the poor and middle class reaping the benefits of such a huge budget? If government can raise people up through spending, why isn't that happening already?

 

[fried-chicken]

Crazy, you're spot on. Here is the thing, the founders understood tyranny because they lived it first hand. The government is force. It's power and the government can remove our rights and toss us in jail. Contrasts this to the market where we have choices. U may find Wal Mart labor practices repulsive and I can say, hey I don't like Walmart and there is not a damn thing Walmart can do to my liberty. I

I find GMs $49 billion bailout disgusting and I hate that company. I will never buy a GM product because they are huge hypocrites. They take tax money to save their sorry butt and then turn around and build factories in Mexico and China. Screw that. That's a huge wealth transfer through crony capitalism. GM can rot in hell.

If you want wealth to filter down then stop taxing wealth. Stop penalizing investment. I would love to hand my wealth down to my kids but when government swoops in says pay me 39% for your gains, well the 39% less I can give to my kids. Here is something for you to consider. Let's say I sell all my real estate in 10 years for $2 million dollars.

For discussion purposes the cap gains on it will be around $780,000! That's a crap load of money! I love boating and my disabled son loves boating. My dream boat is a Grady White Express 330. New that boat sells for around $450,000. When the government confiscates that $780,000 they essentially take enough money for me to buy almost 2 Express 330s. So. When I buy that boat, I support Grady White, The dealer, Yamaha outboards, Garmin, Taco outriggers, all the companies who sold Grady the parts. So, in my decision to either invest the gain or blow it, I decide what's best for me and my family, not the government. When the government confiscates wealth it erodes it plain and simple.

At my very core I trust everyone reading this thread that YOU KNOW what's best for YOU not me, and damn sure not the government. Keep wealth moving by stop penalizing it, stop taking it when people die and allow people to simply run their lives.

You used Walmart saying there's nothing Walmart can do to your liberty. OK. I disagree but let's look at another company.

How about GlaxoSmithKline who own lamotrigine? Is there anything they can do to take away the liberty of Americans? How about United Healthcare?

There are companies that can impact your liberty in America, government isn't the only entity that can take away your freedom. Sometimes the government can protect your freedom from companies. Like when they said healthcare companies cannot deny someone health insurance who has had cancer or epilepsy. Imaging a young adult who graduates college and gets a job only to find out he cannot get insurance because of his condition. Is that the free market that we are striving for? Or is it only freedom from taxes we care about?

 

[fried-chicken]

Tell me, if we were to increase taxes on the rich just for the sake of balancing the budget, how will that improve the lives of the middle and lower classes? We unfortunately are still funding the budget through borrowing, so why aren't the poor and middle class reaping the benefits of such a huge budget? If government can raise people up through spending, why isn't that happening already?

Who's to say it isn't already raising people up but just not enough? Public schools raise people up. There's probably hundreds of things like that I could easily identify but I'm not going to take the time to.

 

[Crazyhole]

Here's an example of how our tax code dictates behavior

I'm an electrical contractor by trade, but over the last 10 years have increasingly gotten into property development, flipping, and rental properties. I recently bought a house and this is what I have to consider thanks to tax law:

If I get this house completed and sold in the same year, I get to deduct my expenses and pay a rate that falls under the regular income bracket.

If I wait until after the first of the year and sell it, I will be able to deduct my expenses and pay a lower rate.

If I decide to keep the property and rent it out, I will pay capital gains tax on the rental income and depreciate out my expenses over 27 years.

If I quit the electrical business and become a full time landlord, the rental income will be taxed as regular income.

I can sell the property under any of the above circumstances and re-invest it in a like-kind investment and defer the taxes until I sell the next one, at which time I can again reinvest and continue the deferment, then wait until a tax bill comes through that drops the capital gains rate even lower and cash out of possibly 40 years worth of gains.

If I die, I can transfer the gains into a trust and avoid taxes altogether and my children would then have the opportunity to defer for another lifetime.

I can also choose to live in the house for 2 years, lose my deductions on the expenses but sell the property tax free, which I can do twice over any 3 year period.


Anybody else see how ridiculous this is?

 

[fried-chicken]

Here's an example of how our tax code dictates behavior

I'm an electrical contractor by trade, but over the last 10 years have increasingly gotten into property development, flipping, and rental properties. I recently bought a house and this is what I have to consider thanks to tax law:

If I get this house completed and sold in the same year, I get to deduct my expenses and pay a rate that falls under the regular income bracket.

If I wait until after the first of the year and sell it, I will be able to deduct my expenses and pay a lower rate.

If I decide to keep the property and rent it out, I will pay capital gains tax on the rental income and depreciate out my expenses over 27 years.

If I quit the electrical business and become a full time landlord, the rental income will be taxed as regular income.

I can sell the property under any of the above circumstances and re-invest it in a like-kind investment and defer the taxes until I sell the next one, at which time I can again reinvest and continue the deferment, then wait until a tax bill comes through that drops the capital gains rate even lower and cash out of possibly 40 years worth of gains.

If I die, I can transfer the gains into a trust and avoid taxes altogether and my children would then have the opportunity to defer for another lifetime.

I can also choose to live in the house for 2 years, lose my deductions on the expenses but sell the property tax free, which I can do twice over any 3 year period.


Anybody else see how ridiculous this is?

Each of those scenarios is you using the house for something vastly different except the first two which is just you deciding when to take expenses. It seems pretty normal since the effective tax rate is similar unless it became your primary residence or you die.

 

[Nautiknight]

We have a tax code that wasn't designed for the shift in scale that companies are now able to achieve. Thats caused us to see the increasing speed at which wealth is consolidating at the top. Meanwhile as were allowing the ultra rich to keep more and more wealth our deficit is the highest its ever been spreading that burden to the entire population when we should just be collecting taxes.

Republicans always talk about "free stuff" but allowing people to pay no taxes when the country doesn't have a balanced budget is just "free stuff" for the rich. Its a free loan to be paid off by US citizens at a later date.

Fried Chicken, I implore you to take a few minutes to read Article 1 Section 8 of the Constitution and look at the 18 enumerated powers and the role the states entrusted in the Federal Government to do..read those 18 things and then compared what the Federal government is actually doing. I find we have a spending problem. We don't have a taxing problem.

Let me ask you this? Do you shop at Amazon or do you shop local? You my friend have the power to shop local and not go to Amazon. I own a small botique chocolate and coffee company. I enjoy bicycling. I shop local at my local bicycle store to support the people in my community. We can all shift the wealth by shopping small and not always going to Amazon or Target or where ever. Yes, you will pay more because of economies of scale, but instead of saying government needs to do this or that, when we could shift OUR buying to support small business. It's in YOUR power to make a difference and nobody has to get government involved.

Everyone wants union wages but they only want to pay Walmart prices. That's the core problem as I see it

 

[Crazyhole]

Fried Chicken, I implore you to take a few minutes to read Article 1 Section 8 of the Constitution and look at the 18 enumerated powers and the role the states entrusted in the Federal Government to do..read those 18 things and then compared what the Federal government is actually doing. I find we have a spending problem. We don't have a taxing problem.

Let me ask you this? Do you shop at Amazon or do you shop local? You my friend have the power to shop local and not go to Amazon. I own a small botique chocolate and coffee company. I enjoy bicycling. I shop local at my local bicycle store to support the people in my community. We can all shift the wealth by shopping small and not always going to Amazon or Target or where ever. Yes, you will pay more because of economies of scale, but instead of saying government needs to do this or that, when we could shift OUR buying to support small business. It's in YOUR power to make a difference and nobody has to get government involved.

Everyone wants union wages but they only want to pay Walmart prices. That's the core problem as I see it

Ha! I started a coffee shop 18 years ago and owned it until 2011.

 

[Boosted87]

Of course inequality will grow because the bottom number stays at or near zero while the big number grows. Its called equality of opportunity.

This isn't about absolute numbers. It's bout the effects of non-equal growth rates compounded over time and the logical (mathematical) conclusion.

 

[fried-chicken]

Fried Chicken, I implore you to take a few minutes to read Article 1 Section 8 of the Constitution and look at the 18 enumerated powers and the role the states entrusted in the Federal Government to do..read those 18 things and then compared what the Federal government is actually doing. I find we have a spending problem. We don't have a taxing problem.

Let me ask you this? Do you shop at Amazon or do you shop local? You my friend have the power to shop local and not go to Amazon. I own a small botique chocolate and coffee company. I enjoy bicycling. I shop local at my local bicycle store to support the people in my community. We can all shift the wealth by shopping small and not always going to Amazon or Target or where ever. Yes, you will pay more because of economies of scale, but instead of saying government needs to do this or that, when we could shift OUR buying to support small business. It's in YOUR power to make a difference and nobody has to get government involved.

Everyone wants union wages but they only want to pay Walmart prices. That's the core problem as I see it

Hell no I don't only shop local. I'm not for supporting businesses that can't compete for no reason. I'm for actually taxing businesses that are using scale to lay off workers and shut down companies but also add efficiency. I'm not trying to go backward I'm trying to change the system so it can continue to work as we go forward. Amazon is great as long as they pay taxes on money they are taking out of the hands of displaced retail workers and owners who, guess what, used to pay taxes but no longer do because they got closed down by a company that doesn't pay.

 

[Crazyhole]

Hell no I don't only shop local. I'm not for supporting businesses that can't compete for no reason. I'm for actually taxing businesses that are using scale to lay off workers and shut down companies but also add efficiency. I'm not trying to go backward I'm trying to change the system so it can continue to work as we go forward. Amazon is great as long as they pay taxes on money they are taking out of the hands of displaced retail workers and owners who, guess what, used to pay taxes but no longer do because they got closed down by a company that doesn't pay.

So what's better for the lower and middle classes, taxing Amazon more and growing the bureaucracy or encouraging them to spend more of their earnings?

 

[Crazyhole]

Regarding stock investments, would it be out of line to suggest a 5 year cap on unrealized gains?

 

[fried-chicken]

So what's better for the lower and middle classes, taxing Amazon more and growing the bureaucracy or encouraging them to spend more of their earnings?

You can encourage all you want but companies will optimize earnings within the rules they are given. If you want change in behavior you need different rules.

 

[Crazyhole]

You can encourage all you want but companies will optimize earnings within the rules they are given. If you want change in behavior you need different rules.

I think you're finally starting to get the point of the thread. Don't grow government, encourage healthy spending. The question is how can that be accomplished. Maybe go back to the first page and read the ideas proposed and war-game them out.

I just pulled up to my project house and was thinking about the neighbors garage. It's a total shithole that's pretty much unusable for anything other than raccoon habitat. I know the neighbors have the money to have it torn down and rebuilt, so why not give a 1 for 1 tax credit on them doing so, as opposed to encouraging them to take that money and put it in the stock market where they can defer taxes? They spend 10 grand to replace it, save 10 grand in taxes, and increase MV by doing so.

 

[Boosted87]

Crazy, you're spot on. Here is the thing, the founders understood tyranny because they lived it first hand. The government is force. It's power and the government can remove our rights and toss us in jail. Contrasts this to the market where we have choices. U may find Wal Mart labor practices repulsive and I can say, hey I don't like Walmart and there is not a damn thing Walmart can do to my liberty. I

I find GMs $49 billion bailout disgusting and I hate that company. I will never buy a GM product because they are huge hypocrites. They take tax money to save their sorry butt and then turn around and build factories in Mexico and China. Screw that. That's a huge wealth transfer through crony capitalism. GM can rot in hell.

If you want wealth to filter down then stop taxing wealth. Stop penalizing investment. I would love to hand my wealth down to my kids but when government swoops in says pay me 39% for your gains, well the 39% less I can give to my kids. Here is something for you to consider. Let's say I sell all my real estate in 10 years for $2 million dollars.

For discussion purposes the cap gains on it will be around $780,000! That's a crap load of money! I love boating and my disabled son loves boating. My dream boat is a Grady White Express 330. New that boat sells for around $450,000. When the government confiscates that $780,000 they essentially take enough money for me to buy almost 2 Express 330s. So. When I buy that boat, I support Grady White, The dealer, Yamaha outboards, Garmin, Taco outriggers, all the companies who sold Grady the parts. So, in my decision to either invest the gain or blow it, I decide what's best for me and my family, not the government. When the government confiscates wealth it erodes it plain and simple.

At my very core I trust everyone reading this thread that YOU KNOW what's best for YOU not me, and damn sure not the government. Keep wealth moving by stop penalizing it, stop taking it when people die and allow people to simply run their lives.

Great discussion.

I despise taxes like anybody else. But keep in mind the original point of my post. It's not an argument that we need more taxes. It's simply pointing the mathematical reality of wealth consolidating at the top, and asking what the logical conclusions are. I think to give this topic a fair shake, you need to do the opposite of what you just did. Don't view this through a personal lens, but instead, through a societal lens. That's how the founding fathers looked at these topics.

It can be easy to cherry pick quotes, but here's something just to get you thinking about how Jefferson and Madison thought about these topics.

Jefferson frequently cited an Adam Smith quote to justify his views on property and death, and he believed society had the right to determine what the rules should be:

"I set out on this ground, which I suppose to be self evident, "that the earth belongs inusufruct to the living"; that the dead have neither powers nor rights over it. The portion occupied by an individual ceases to be his when himself ceases to be, and reverts to the society" - Thomas Jefferson
​

Jefferson was proposing progressive taxation waaaay back

"I am conscious that an equal division of property is impracticable. But the consequences of this enormous inequality producing so much misery to the bulk of mankind, legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with natural affections of the human mind...Another means of silently lessening inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in a geometrical progression as they rise." - Thomas Jefferson
​

Madison also raised concerns that inequality in property ownership could subvert liberty in one of two ways:

"...one of two things cannot fail to happen; either they will unite against the other description and become the dupes and instruments of ambition, or their poverty and dependence will render them the mercenary instruments of wealth. In either case, liberty will be subverted; in the first by a despotism growing out of anarchy, in the second, by an oligarchy founded on corruption."
​

So yes, I think it's fair to say that at least some portion of the Founding Fathers would be concerned about societal trends that lead to the accumulation of wealth at the top. This makes sense if you think about the systems they were opposed to, based largely on hereditary accumulation of land and wealth.

 

[sk8knight]

Regarding stock investments, would it be out of line to suggest a 5 year cap on unrealized gains?

How would you do that and not hurt people who are counting on that for retirement or in ESOPs and the like?

 

[UCFBS]

At the end of the day, I tend to believe this is cyclical. The sample size in the modern era is too small to back that up, but that seems logical to me. You go through a period of consolidation until you reach a tipping point. That could be a major event that catalyzes change (market crash, war, etc), or simply a populist progressive economic policy takes the reigns for a while.

Of course, the last time we had this level of inequality was right before the market crash in the '20's. That was followed up with New Deal policies and WWII, then very high marginal tax rates.

It's really hard to look at a chart of 0.1% wealth share next to a top marginal tax rate chart, and not correlate them.

It's like to see that compared to innovations and patents, as well as foreign investment in the US. If the idea is to take away incentives, then it'll work very well.

 

[Crazyhole]

How would you do that and not hurt people who are counting on that for retirement or in ESOPs and the like?

Exempt them I suppose. Not sure exactly how you would draw the line and I'm not suggesting we do it, but the OP was talking about wealth consolidation and this would be a consideration in the discussion. Obviously, there are 2 sides of every coin when we look at solutions and you brought up a good flip side.

Maybe some people don't see it as a problem but it is and so far the only solution being put forth is to use wealth confiscation and grow government. People on the right better start thinking about alternative measures if they want to have a chance of avoiding it.

 

[UCFBS]

The one thing I don't like about Trump is that he wants negative interest rates like other countries. I'm struggling to agree with Trump on many things, other than the tax code.