Is America Coddling the Super-Rich?

[apeiron]

Also, a simple mathematical truth, just as food for thought: if government services in $ per capita were held constant, while gdp per capita rose, tax revenue per capita - andthe thus rates -- could drop.

The only question of interest here is what degree of wealth inequality is optimal for a society?

So what gini coefficient correlates with some mix of happiness, stability, innovation?

I'd vote for the political system which can deliver that.

 

[Proton Soup]

That’s some really deep thoughts you’ve got there PS...

where are you getting your energy from sweden?

 

[DevilsAvocado]

where are you getting your energy from sweden?

You better ask http://en.wikipedia.org/wiki/Agip" ... but we do start our JAS 39 Gripen from Sicily... and that works fine!

 

[Physics-Learner]

Agree 1000%.

The answer to everything is jobs jobs jobs jobs jobs jobs jobs jobs jobs and more jobs.

It’s when things starts going backward you run into a 'destructive spiral' = less revenues + more outflow = nervous market = lesser jobs = lesser revenues + further outflow, etc, etc.

not jobs, quality of life.

 

[DevilsAvocado]

not jobs, quality of life.

Yeah, I know what you mean, but without money there can’t be much quality, right?

And hopefully you find a job that really interest you, and then you could smile both on the way to the bank and your new job!

 

[WhoWee]

What does health care spending have to do with Warren Buffet's desire to entice other Billionaires to give their money away?

It just occurred to me that if capital gains rates increase drastically for the super-wealthy - structuring charitable donations the way Buffet has done will be the tax reduction program of choice. Maybe he wants the rates to increase in order to force donations?

 

[Physics-Learner]

i am probably older than most of the posters, but when i was a kid, most mothers did not work.

when i refer to quality of life, i am talking about many things. spendable income is one thing. but if you have to work twice as many hours as you once did, it is hardly worth it.

if most of our govt was deleted, most of our taxes would be deleted, and a couple might end up only needing to work 20 hours a week for each of them, giving them much more free time to enjoy one another as well as raise their kids.

it won't be long before the majority of the work force has never heard of a single wage earning family.

 

[Physics-Learner]

your psychological health would be better. your physiological health would be better. our health care costs would decrease a lot, etc. etc.

jobs and taxes are the 2 concepts that get discussed at every election. been happening since jesus was a boy. they haven't solved it yet, nor are they gonna.

it only takes a small step for people to see the light - they need to open their eyes, and take their heads out of the sand.

 

[russ_watters]

Eh... government bias issues...?

Just for clarity, what I mean by that is that some statistics are gathered and disseminated by doctors and others are gathered and disseminated by governments. Perhaps you believe Castro when he says his country's life expectancy and infant mortality are better than the US's. I don't.

More to the point, the US is a world leader (by which I mean one of the 'worst') in 1-day old infant mortality. Does that mean our neonatal care is among the worst in the world? No, actually, it means just the opposite: we try very hard and are very good at taking care of sick infants and as a result, we don't just write off babies who die in their first day as stillbirths as is common in other places. Discussion of these issues is not difficult to find online:

Life expectancy at birth is a particularly limited measure of health-care performance across nations, because it generally fails to account for such important variables as lifestyle, culture, income level, and educational achievement. Life expectancy at older ages, such as at 65, gives a clearer picture — though it does not eliminate the confounding distortion of non-medical factors — and using that measure, the apparent life expectancy gap between the U.S. and other comparable nations narrows. In fact, if one goes further out on the age curve to age 80 and over, one finds that the U.S. probably leads the developed world in life expectancy...

study published earlier this month in Demography finds that at age 55 and beyond, Americans are sicker by far than the English, yet older Americans don’t die earlier than their British counterparts: Death rates were equivalent for 55-to-64-year-olds, and beyond age 65, Americans had a slightly greater probability of survival. Why is this so? Perhaps because the U.S. health-care system diagnoses and treats illnesses (particular among the elderly) more aggressively than does the National Health Service — though, of course, all that extra screening and more intensive treatment costs more money.

http://www.nationalreview.com/critical-condition/253314/debunking-richard-cohen-how-does-us-health-care-system-stack-thomas-p-mill#

I mean, c'mon - we all know the 'lazy, fat American' stereotype, right? So if we live unhealthy-er lifestyles, we should die a lot sooner, right? The logic here is not very difficult.

Look, I’m not pointing any fingers here, I’m just saying that you have the most expensive healthcare in the world, and that maybe you can do something about it.

Since I believe that in general you get what you pay for, I don't really want to "do something about it!"

 

[russ_watters]

o Middle-class bait-and-switch. First, Democrats are pushing for a tax increase on $200k/$250k and up, not just on Buffet's friends making millions annually. Second, and as https://www.physicsforums.com/showpost.php?p=3452865&postcount=8":

To expand on this, Buffett starts with the billionaires, and by the end moves down to the millionaires, but he's mostly discussing capital gains taxes in this op-ed and I've never heard anyone ever suggest a progressive capital gains tax and he isn't explicit about it here. So it appears to me that what he really wants - and I know what is more commonly wanted - is a flat increase in the capital gains tax. That affects virtually everyone, not just the super or moderately rich.

 

[DevilsAvocado]

your psychological health would be better. your physiological health would be better.

I need a doctor... I see double…

 

[russ_watters]

The only question of interest here is what degree of wealth inequality is optimal for a society?

So what gini coefficient correlates with some mix of happiness, stability, innovation?

I'd vote for the political system which can deliver that.

That's an interesting question. My answer is that a government purported to allow people the freedom to pursue happiness on their own should not actively seek to cap/limit that pursuit. So IMO, your question has no answer.

Moreover, I would not be inclined to accept - without evidence - that gini coefficient actually does correlate with happiness, stability, and innovation. Logically, it wouldn't make sense for it to: Perfect equality doesn't help anyone if everyone is starving to death equally. And on the other end, if one person is eating bread while another is eating caviar, both are still better off than the guys starving to death in the other country!

 

[WhoWee]

That's an interesting question. My answer is that a government purported to allow people the freedom to pursue happiness on their own should not actively seek to cap/limit that pursuit. So IMO, your question has no answer.

Moreover, I would not be inclined to accept - without evidence - that gini coefficient actually does correlate with happiness, stability, and innovation. Logically, it wouldn't make sense for it to: Perfect equality doesn't help anyone if everyone is starving to death equally. And on the other end, if one person is eating bread while another is eating caviar, both are still better off than the guys starving to death in the other country!

The question that comes to my mind is this - why is more better at the minimum safety net/welfare level? Too many benefits might make life too comfortable and actually be a disincentive to be productive.

Likewise, on the other end of the spectrum, (apparently) when an individual is as successful as Buffet - perhaps boredom, guilt, or a realization that you can't spend it all - triggers a need to give it all away?

Or perhaps, it's the cumulative effect of multiple disincentives to produce that is de-stabilizing the economy - welfare and extended unemployment on one end and regulations and tax policy uncertainty on the other?

 

[russ_watters]

That's a pretty common argument, with commonly cited facts. It argues that since the rich are making more than they used to, they should pay more. And since the "everyone else" aren't, they shouldn't. Fine. Are they? Those facts would seem to me to be critical to reaching the conclusion -- in fact, the conclusion kinda implies something about that, doesn't it...?

So before we look up the facts, let's agree on the logic: if the "everyone else" is paying the same or less taxes than they were before and the rich were paying a lot more, then the recommended correction has already happened, right...?

Ok, Russ, I'll bite: http://thinkprogress.org/economy/2010/02/11/173127/narrow-tax-burden/

According to the second graph, the tax burden on the middle 20% rose a little from 1960 to 1980, and since have dropped by a small amount. At the same time, rates for the top .1% have [inconsistently] dropped. Since it was pointed out to us previously that incomes for the "everyone else" have been pretty stagnant, we can say:

1. Recently, virtually all of the economic gains have gone to higher income earners.
2. Virtually all of the dollar value increases in taxes - all of the additional tax revenue to the government - has been for/provided by those higher income earners.

On the flip side:

3. For the "everyone else", incomes have stagnated and...
4. Taxes haven't changed.

It doesn't look to me like the problem typically proposed by the left actually exists as they have characterized it.

 

[edward]

Buffet mentions capital gains because it is important. Hedge fund managers are a good exapmle because they pay 15 % capital gains tax even on bonuses.

Every one else pays the going rate on bonuses.

Can't find the link I want so this one will have to do.

http://www.thomhartmann.com/forum/2011/04/true-cost-25-hedge-fund-billionaires

 

[Hells]

I've posted this before. Warren Buffet seems to have a political agenda as he doesn't mention the $Billions his company, Berkshire Hathaway, pays in taxes - in addition to his personal taxes. It's unusual for a business owner (someone who built the company from the ground up - not a hired hand) not to consider all of the taxes they pay.

He got his wealth from investing into other companies - companies from whose share price the corporate tax was already deducted when he bought them!

Those who derive their main income from investment can't claim they are being taxed by the corporate tax!

 

[apeiron]

That's an interesting question. My answer is that a government purported to allow people the freedom to pursue happiness on their own should not actively seek to cap/limit that pursuit. So IMO, your question has no answer.

Moreover, I would not be inclined to accept - without evidence - that gini coefficient actually does correlate with happiness, stability, and innovation. Logically, it wouldn't make sense for it to: Perfect equality doesn't help anyone if everyone is starving to death equally. And on the other end, if one person is eating bread while another is eating caviar, both are still better off than the guys starving to death in the other country!

There is plenty of research bearing on such correlations. I cited The Spirit Level evidence in this thread - https://www.physicsforums.com/showpost.php?p=3457208&postcount=2 - where Ivan has started a discussion on exactly this issue.

My short reply is that happiness is not individual but social for most people. And all systems must be shaped by constraints. That is a basic scientific fact.

So your analysis is too simplistic even to bother arguing against. The question begins with considering the optimal balance of individual (or local) freedoms and social (or global) cconstraints.

The fact that you introduce the strawman of "perfect equality" shows that you don't actually find this question "interesting" enough to risk questioning your all too familiar by now worldview.

 

[Tosh5457]

The richest of the riches is saying how they pay low taxes and the taxes need to be increased, and there are still people here trying to prove he's not right...

 

[edward]

The richest of the riches is saying how they pay low taxes and the taxes need to be increased, and there are still people here trying to prove he's not right...

Apparently there are a few here who think Buffet must have some sinister ulterior motive. The man has pledged half of his fortune to charity. That is enough to convince me that he is sincere.

 

[mheslep]

Apparently there are a few here who think Buffet must have some sinister ulterior motive. The man has pledged half of his fortune to charity. That is enough to convince me that he is sincere.

Most US billionaires behave similarly with their fortunes, Gates, Koch, etc. Are you similarly convinced about all their motives?

 

[MarcoD]

Well I think the U.S. government is something like 40% of the U.S. GDP in terms of its spending at least.

Uhm, I don't know spending, I was thinking of the government debt in terms of percentage of GDP. Sweden is about 33%, most of the EU is about 60%, Italy, Spain, Belgium are around 100%, Greece is about 150%. (If memory serves me well.)

I actually don't know the US debt in terms of GDP. Most sources claim it is about a 100% at the moment, but the S&P paper on the downgrade put -I thought- US debt at 57% of GDP (which wouldn't make it any real problem to worry about.)

Anyone on the clear on this and why there are different estimates on US debt in terms of percentage GDP?

 

[edward]

Most US billionaires behave similarly with their fortunes, Gates, Koch, etc. Are you similarly convinced about all their motives?

Although the Koch brothers do give to charity they don't come close to the what Gates and Buffet have pledged. Their Libertarian motives are very apparent. When they pledge half of their fortune to charity let me know. I won't hold my breath.

 

[MarcoD]

Although the Koch brothers do give to charity they don't come close to the what Gates and Buffet have pledged. Their Libertarian motives are very apparent. When they pledge half of their fortune to charity let me know. I won't hold my breath.

Yah, I have seen comments on 'noblesse oblige,' and ethical conduct of the rich. As far as I am concerned, history shows that there is nothing to expect from that. For instance, the Brits massively exported food out of Ireland when the population was starving. I doubt anything changed. Sure some extremely rich people can give away half their fortune, but to put faith in that as a solution to any problem?

 

[EWH]

"Moreover, I would not be inclined to accept - without evidence - that gini coefficient actually does correlate with happiness, stability, and innovation. "

The marginal utility of money is logarithmic (or declines even more steeply if there is risk aversion - see "http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.188.6520&rank=1"" and its citations), and IIRC from an article which I don't have at hand, the corner of the graph is roughly between $5K to $10K per year for an individual - after that, increasing income has less and less impact on happiness.

To illustrate: if a policy results in 1 person with an income of $1M losing $100K and 1 person with an income of $10K gaining $1112, then there is a net gain in overall utility even though $98,888K has disappeared. This reduction in income disparity also lowers the Gini coefficient. If person with an income of $1M loses $100K and 1000 $10K earners get $100 each, then the absolute gain in utility would be greater than if the person with $1M income had increased their income to $20B. From a static perspective, the optimal utility would be achieved with equal earnings for all members of the population, and even in a dynamic perspective where rewarding individual productivity increases the overall production, the bulk of the increase in individual utility would come with the first dollars of the reward, the effectiveness of financial incentive would quickly saturate, and the point of negative returns for overall utility would be reached at surprisingly low incentive amounts.

Edit: add reference:
http://www.ssb.no/publikasjoner/DP/pdf/dp_118.pdf"
Abstract
It is shown that if social welfare is the sum of logarithmic utility function, the optimal income distribution and the welfare effect of any income redistribution is independent of the equivalence scales. In optimum all households have the same per capita income. Based on this observation it is discussed to what extent traditional welfare theory can be said to be concerned about fair income distribution.
[The criterion should obviously be equalizing individual income rather than household income, though. This should of course include children.]

 

[WhoWee]

He got his wealth from investing into other companies - companies from whose share price the corporate tax was already deducted when he bought them!

Those who derive their main income from investment can't claim they are being taxed by the corporate tax!

How many years does Buffet typically hold an investment after a Merger or Acquisition? He has built an empire from the ground up with unparalleled success.

Please explain why the $Billions in taxes paid by Berkshire Hathaway (Buffet's company) is not relevant to this discussion.

 

[WhoWee]

Apparently there are a few here who think Buffet must have some sinister ulterior motive. The man has pledged half of his fortune to charity. That is enough to convince me that he is sincere.

Of course he's sincere about putting his wealth into the Gates charitable foundation - he is also getting a very large tax credit for his contribution. I don't recall that he mentioned the large tax credit that will shield him from future tax rate increases though?

 

[turbo]

Is there any metric under which Buffet is not portrayed by the right as a self-serving creep or a Marxist commie? At some point, we have to accept people at face value, absent evidence to the contrary. Maybe Buffet is a wildly successful businessman who wants to use his money to support humanitarian causes... Is that so implausible that people can make up conspiracy theories about him and be believed?

 

[vici10]

The marginal utility of money is logarithmic (or declines even more steeply if there is risk aversion - see "http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.188.6520&rank=1"" and its citations), and IIRC from an article which I don't have at hand, the corner of the graph is roughly between $5K to $10K per year for an individual - after that, increasing income has less and less impact on happiness.

This would be true, if money would only be means for consumption. Most people think this way, because money for them is buying food, clothes, shelter, entertainment, education and so on. But this would not explain why rich people, millionaires and billionaires do not stop accumulate more and more and are not satisfied with their millions. They can not possibly consume all these money.

The explanation could be that money represents something else. That money is a quantification of power that one has in a society. If one has more money, one can lobby government for example. And since power is relative, it does not matter how much one has, it has to be more than others. If money is quantification of power, increasing income inequality means increasing power inequality. Ending up with small group of very powerful people and majority that does not have a say in how society is governed.

 

[WhoWee]

Is there any metric under which Buffet is not portrayed by the right as a self-serving creep or a Marxist commie? At some point, we have to accept people at face value, absent evidence to the contrary. Maybe Buffet is a wildly successful businessman who wants to use his money to support humanitarian causes... Is that so implausible that people can make up conspiracy theories about him and be believed?

I'm not certain a "Right" label is correct in describing me (REALLY) - more of a center-right surrounded by far-left. Labels aside, I think Buffet is a financial genius. He hasn't just made big deals -he's assembled a collection of small companies in nearly every industry. His organization employs over 250,000 people.

If he wants to give his $Billions away via the Gates charitable trust and receive a huge tax credit that will shield him from future tax rate increases - that's great! Just please don't tell me he's going to pay more in taxes than he does now if the rates increase.

Btw - feel free to support the "self-serving creep or a Marxist commie" crap.

 

[turbo]

If he wants to give his $Billions away via the Gates charitable trust and receive a huge tax credit that will shield him from future tax rate increases - that's great! Just please don't tell me he's going to pay more in taxes than he does now if the rates increase.

Please show us all in detail how his "huge tax credit" is going to work, and how he's going to lock in the credits.

 

[WhoWee]

Please show us all in detail how his "huge tax credit" is going to work, and how he's going to lock in the credits.

See post 39 please.
"Interestingly, given the total is about $30Billion (not counting 2005) for years 2002 - 2010 - I found this article - apparently, he'll receive about $30Billion in tax credits for giving away his shares. my bold
http://www.nytimes.com/2006/06/27/bu...berkshire.html

"Tax experts said the charitable gift essentially provides $30 billion in income tax credits — something that Mr. Buffett is unlikely to use in his lifetime. It will also allow him to avoid about $4.5 billion in capital gains tax. And giving away the shares will also help avoid taxes on his estate. Estate planning experts called it a simple and pragmatic approach, true to form for Mr. Buffett.""

 

[turbo]

"Tax experts said the charitable gift essentially provides $30 billion in income tax credits — something that Mr. Buffett is unlikely to use in his lifetime.

So accumulating tax credits that he will never use is a good reason to slam him? Please present some factual data that supports your position.

 

[WhoWee]

So accumulating tax credits that he will never use is a good reason to slam him? Please present some factual data that supports your position.

A $30Billion tax credit for contributing to a charitable trust doesn't qualify? If they raise his tax rate - as he's requesting - his income will be shielded.

 

[apeiron]

The explanation could be that money represents something else. That money is a quantification of power that one has in a society.

I agree. Which is why conspicuous philanthropy can be more satisfying than conspicuous consumption, as in the case of Buffett, Gates, etc.

So if that is the case, the economic system can be redesigned to serve those status needs. We can have gold and platinum class tax contributors just like any event these days has grades of sponsors.

Again, define the actual desired social outcome. Then worry about the mechanisms that achieve it.

The current mindless growth and consumption economic model does not serve the real needs of humans. Many people are thinking about a better approach. Buffett is just one straw in the wind.

 

[apeiron]

The marginal utility of money is logarithmic (or declines even more steeply if there is risk aversion - see "http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.188.6520&rank=1"" and its citations), and IIRC from an article which I don't have at hand, the corner of the graph is roughly between $5K to $10K per year for an individual - after that, increasing income has less and less impact on happiness.

Thanks for some excellent data. I am interested in actual models here, even if others aren't.