Whenever I see stats like this that don't account for age, I ignore them. They are worthless.
It compares a recent Stanford grad from a wealthy family to a 55-year-old who was scraping through the first 35-40 years of life, but now makes $190k/yr as a successful tradesman during boom time. The former will count as "poor" and the latter will count as "top 10%".
In other words, no, it's not comparing Americans of different classes. It's comparing Americans at different stages of life. Or just the ebb and flow of income over and individual's life (selling a house even in a modest area can easily put you into the top 10% for a year).
You need to follow individuals over their lives to get a better picture of who is struggling and who is thriving.
That's a myth. There's plenty of data on this. Most American never get anywhere close to the top 10% - not even remotely - regardless of age. The idea that everyone is just waiting around for their career to advance enough to put them in the upper-middle class is ludicrous on its face. Just as ludicrous as the myth that only high school kids work for minimum wage.
The top 10% are worth a ton, there’s not getting around that. But not slicing by age really does muddy things. The US median net worth for 65-74 is over a quarter million dollars. The median net worth for under 35 is $14k. That’s about a 20x difference! Anything that doesn’t split by age is nearly impossible to interpret.
For reference the top 10% net worth splits at about $1.2M, so both of your points are important.
So you've seen the wealth gap graphic, where they slice it up into deciles? Further into percentages?
It's wrong, it doesn't account for debt. There should be a huge mass of people that are net negative. I think we're really presented with all the wrong information.
First we need to break down into a heat map of CoL which can act as an approximation of demand for the given region. Then we need to look at individual median (perhaps modal) cash flow, where your deciles land, and whether that's translating into profit when you calculate in inflationary pressures. Then you've got to look at average degrees of freedom given demographics like no-diploma, GED/equivalent, HS-diploma, and degree strata that indicate an upward move in purely economic terms. I think what you'd find is the vast majority of people are just on the treadmill, and will for the foreseeable future there remain.
I expect the median net worth (what's the method?) of a 35 year old is very much in the negative space. And I'd hope over a lifetime that the 65-74 cohort is breakeven - which is about what you've indicated - Zillow indicates the average value of a house is $264k.
To some extent this is how our system is designed to work, but the system itself is predicated on a slew of fallacious logic and wholly removed from any semblance of morality while dually being totally unaccountable for the destruction and extraction of value that it is founded on.
I should also add that power as a function of wealth had ought to be looked at. What is the effective cost of having a voice in policy? I suspect it's in the highest echelons of net worth that you can even begin thinking about leveraging the system, and locally at that. At which point, corporate personhood might had ought to be considered, how does that deform our distribution?
If someone has a mortgage on a home, their net worth is still positive (unless they're under water). If you put 20,000 down on a 100,000 home and get a 80,000 mortgage, then your net worth is still 20,000. Yes, you have 80,000 in debt, but you own an asset worth 100,000. Net worth is total assets - total liabilities.
> then your net worth is still 20,000. Yes, you have 80,000 in debt, but you own an asset worth 100,000.
No you have 20% ownership of an asset that is worth $100,000. The bank owns the other 80% of that asset. When you pay your mortgage every month you are essentially buying a portion of their stake in your house. At the end of the mortgage they will own 0% and you will own 100%.
That’s not true at all. If you buy the house for 100k and sell it for 200k, you walk away with 120k after paying off your mortgage. If you only owned 20%, then you would walk away with 40k. Similarly, in non-recourse states (which is most states) you are on the hook for the mortgage amount if the value of the house goes down.
You meant to say "recourse" states - non-recourse means that the bank can't pursue you for any remaining amount you owe on the house after they foreclose on the house. Non-recourse is not very common, but California is a non-recourse state, for example.
Debt is at best a red herring, an individual with a $30k mortgage on a $60k home is not in the same situation as an individual with $30k in the bank and $30k of credit card debt yet they both have $30k in debt.
If you have a 30k mortgage on a 60k home by selling all your assets you're 30k up, whereas the other scenario has you at zero. Net worth would arrive to the same conclusion, so I don't see net worth including wealth to be a bad metric here.
Sure, but the reason for that isn’t that they simply haven’t lived long enough to accure wealth. Younger generational cohorts have less than their parents did at the same age.
I think this can also be split by class and background to provide further clarity. For example, every single one of my classmates (we were all lower income people) and myself are head and shoulders above where our parents were at our age or at about the save level with us facing significantly less work and stress to get here. I have a feeling middle-income and upper-income people have seen something different than us.
At that point, there’s a reversion to the mean too. If your parents got lucky, you probably won’t be as lucky. If your parents got unlucky, you probably won’t be as unlucky. And luck aside, you’re still going to be (on average) closer to average than your parents.
No, you would also need to slice by top net worth percentage inside of each age group. You need to compare the percentage of people in each percentile because average/median are going to obscure the disparity. I'd bet that half the people under 35 have a negative net worth.
A large number of Americans will be in the top 10% by income at some point during their life. Edit: I looked it up, and it's actually a majority of Americans (57%) will be in the top 10% at least one year of their life.
As noted, even just selling a house in a random state like Wisconsin can easily put you in that bucket.
Top 10% by wealth is a different story harder to attain. It's frustrating that we pay for things with taxes on income and not wealth, because it hits the upper-middle-class harder than it hits the people with all of the equity.
I get irritated when this little quirk of measurement is trotted out. Someone making 400k / yr as an investment banker is in a very different position than someone who 'makes' 400k selling grandpa's dairy farm and pays off creditors. It's very disingenuous to say that a large number of people will be in the top 10% at some point. Technically true, but meaningless.
Firstly, consecutive years are in fact shown as well in the data linked: 56% of Americans spent 2 consecutive years in the top 20%, and 35% spent 2 consecutive years in the top 10%.
Secondly, these numbers are based on tax filings, and even though the process of the sale of grandpa’s dairy farm may straddle 2 years, the income from the sale isn’t realized across 2 years; it will always register as a single fiscal year, I.e. the year in which the transaction closed. The actual income is not realized until then.
Further, it’s not at all obvious that only considering consecutive years is necessary to invalidate the original GGP claim. The fact that 40% spent 2 not-necessarily-consecutive years in the top 10% (and 62% for the same in the top 20%) especially debunks the notion that one-time inheritance sales make up the variance. Nobody is selling grandpas dairy farm across 2 disjoint years. It also shows us that people do in fact move in and out of these quintiles (or deciles) as one would expect in a dynamic economy, and that those groups aren’t just a static cabal of people twirling their mustaches.
The crux of the argument stands: the majority of Americans experience affluence by spending at least 2 years in the top 10-20%. And at the very least it totally invalidates the absurd claim made (quite confidently, at that) in the GGP comment:
> Most American never get anywhere close to the top 10% - not even remotely - regardless of age. The idea that everyone is just waiting around for their career to advance enough to put them in the upper-middle class is ludicrous on its face.
This is largely attainable for the majority of Americans when you factor in the value of one's home, retirement accounts, and general lifetime savings. Keep in mind we're not talking about how much net worth the majority of Americans have at any snapshot-in-time, we're talking about the maximum net worth attainable in one's lifetime, and what that looks like for the majority of Americans.
There's absolutely no evidence that the top 10% wealth holders has been a static group of people over the last 60 years.
Why is it meaningless? A lot of investment bankers quit, change professions or get laid off and can never re-enter the market. Just look at the number of analysts vs MDs and you'll see that the funnel gets a lot narrower at every stage. And you don't see many analysts in their 30s, so where do they go? There's a lot of turnover in the top 1% and 10%.
There are lots of jobs that consistently pay multiple six figure comp. To compare them to someone who realizes a one time capital gain from an inheritance or whatever is laughable. The two are simply not the same.
People rotate in and out of that 10%. 25 years ago I maybe had a net wealth of 500 bucks, 15 years ago I was negative 180k. Today I am in that 10%. By the time I get to 70 I probably will not be in that 10% anymore. Hell one 'RIFF' and 2-3 years of 'sorry you are not a good fit', medium sized illness, and I could be there again.
> That's a myth. There's plenty of data on this. Most American never get anywhere close to the top 10% - not even remotely - regardless of age.
OK, let's take a look, because the GP was arguing about income mobility across different years of a person's life - intra-generational mobility -- not earnings compared to your parents -- inter-generational mobility. That distinction was the key point made. And the GP is basically correct:
From two studies about intragenerational bottom[1] and top[2] income mobility:
* 53.1 percent will have experienced at least one year within the top 10th percentile
* 36.4 percent will have encountered one year within the top 5th percentile
* 11.1 percent will have experienced one year within the top 1st percentile.
* 70% of Americans spend at least 1 year in the top quintile
* 61% of Americans spend at least 1 year in the bottom quintile.
* 42% of Americans experience at least one year in the bottom decile
Summarizing:
"Taken together, these findings indicate that across the American life course there is a large amount of income volatility. Rather than a rigid class structure, the top and bottom ends of the income distribution are fairly porous. This finding provides an interesting and important caveat to the overall story of rising levels of income inequality across the past 40 years." [2]
Note that a key issue when studying mobility is that you need to do it across a few business cycles. If your study is only during an economic expansion, then it's not going to be meaningful, as life changes tend to clustered around contractions and recoveries, and several such episodes are needed. Thus the studies I selected cover 44 year periods. Some of the studies are for 5-10 year periods, and that's really too small.
No, chmod600 was referring to income, as can be seen from his post:
"$190k/yr as a successful tradesman during boom time. The former will count as "poor" and the latter will count as "top 10%[..].
In other words, no, it's not comparing Americans of different classes. It's comparing Americans at different stages of life. Or just the ebb and flow of income over and individual's life"
You may want to talk about something else, of course, but my reply was to standardUser arguing that chmod600's data was wrong, when in fact he was absolutely right.
Chmod600 was trying to refute the headline, which talked about wealth. If he used income metrics to refute it then he is wrong. He was using the incorrect data set and applying it to the article, so the objection is correct.
It's not a truism given that the original comment is implying that the wealth distribution discussed in the article title is a result of people having more wealth toward the end of their life. Theoretically the 10% of oldest Americans could be the wealthiest 10% as well, although this is certainly not actually the case.
most American have a fair chance at reaching the top 10% by age at some point in the future. not sure of the numbers but I would guess at least 50% of the population is expected to reach am age where 90% of the other people are younger
> Some 11% of Americans will join the Top 1% for at least one year during their prime working lives (age 25 to 60), according to research done by Thomas Hirschl, a sociology professor at Cornell University. But only 5.8% will be in it for two years or more.
> The same holds true for those lower on the income ladder. While just over half of Americans reach the Top 10% at least once in their careers, only 14% stay in it for a decade or more, Hirschl found. (The minimum income threshold for the Top 10% was $141,000.)
I'm in my middle 50s. I have friends who have lived below their means all their lives and invested in wisely-- almost all of these people have sizeable savings now.
I also have friends of my age who did not live below means. They spent what they had and invested almost nothing. Predictably, they have nothing to show.
The system works. It's been foretold in investing books for decades.
Today, we have resources like Bogleheads, Mr. Money Mustache, Dave Ramsey, etc. they all preach the same message, and the message is overwhelmingly truthful.
Accumulating wealth is relatively certain, if you follow the process. There will be rare exceptions, but that's true of most everything.
That's a fair point assuming upward economic mobility in the U.S but statistically speaking it's more likely someone stays rich or stays poor than it is that they move upward into a different bracket entirely
While it is true that much of the recent wealth in the U.S. is self-made and not entirely inherited. It's also true that a child born poor in this country is far more likely to stay as such than they are to become part of the top 10%.
If we lived in an egalitarian society, then pointing out the wealth of the top 10% might be divisive, but considering that our current wealth inequality is worst than 1774 France, then I believe it's a fairly accurate picture being painted.
> It's also true that a child born poor in this country is far more likely to stay as such than they are to become part of the top 10%.
how many of them get to the top 20%, how many more get to the top 30%? in other words, there's no need to be the best basketball player to succeed in life.
> but considering that our current wealth inequality is worst than 1774 France, then I believe it's a fairly accurate picture being painted.
wealth inequality is a meaningless measure, as J. K. Rowling increased it the moment she published her first book, and made it even larger with subsequent releases. If you look at the statistics of it, it might look as if she took advantage of her readers by making them financially poorer by the cost of books they bought. Obviously, the stats have no concern of non-monetary value exchanged here, and proclaim wealth inequality instead.
>how many of them get to the top 20%, how many more get to the top 30%? in other words, there's no need to be the best basketball player to succeed in life.
A fine thought. Though in a world of increasing inequality (Gini coefficient, etc), the "winner takes all" dynamic makes it more and more necessary to actually be "the best basketball player to succeed in life."
They weren't clear with what they meant, but to steelman the argument...
Some things that increase wealth inequality are bad, others are good: J.K. Rowling increased wealth inequality by writing Harry Potter, but the world is better off having a great children's book series. Book purchasers, publishers and authors are all enriched by the existence of the book.
Then you must be distressed that mobility has been decreasing in the US and that we now lag substantially behind many of our European peers on that measure.
Am I the only one seeing a lot of headlines pitting top 10% against the rest? It’s disingenuous to make up headlines like this without mentioning too 10% consists of, you guessed it, top 1% which owns more than 50% of all the stocks.
I agree. I just didn't have the stats to back me up when I wrote that. You are talking about wealth and not stocks, but you make the same point that I'm trying to make, which is that, top x% can be very misleading and clickbaity if you ignore the extreme inequality at the very top and can push the narrative in a direction that's not helpful. Thank you for bringing that up. I'd not be surprised it like 100 people in the country own 20% of all the stocks.
The top 10% is not a static category. People move in and out all the time as a result of ordinary life changes (rising income as you enter prime working years, selling assets to buy a house, selling a house, job loss, etc.).
It doesn't really make sense to be mad at the 10%, because it will probably include you or others in your family unless you are really stuck.
And there are a lot of people who are stuck. Let's not diminish that. But we will never address that if we are conflating them with young people who just happen to have a low income today but have every reason to see themselves in the middle class.
> People move in and out all the time as a result of ordinary life changes (rising income as you enter prime working years, selling assets to buy a house, selling a house, job loss, etc.).
The article refers to the top 10% wealthiest, everything you mentioned is related to income.
I think you're confusing "income" for "wealth". The wealthiest people are the people with the most assets. You don't pop into the top 10% just by selling a house. That doesn't affect your wealth at all.
The wealthiest do tend to be older because they've accrued wealth over a lifetime, but it's definitely not true that if you're old, you're wealthy.
You're right that the "ebb and flow" on wealth is much less of a factor than on income, and that I conflated those two.
But not controlling for age is still a major omission. A lot of middle class people are in the top 10% as they near retirement because they've been saving throughout their life. How many? The article doesn't say.
This does not seem to be true, at least by any numbers I could quickly find. Seems like median net worth for retired folks is under $250k, net worth for 90th percentile folks is 1.25mm.
If you restrict to 65-69 age group, the median only shifts to about 270k, 90th percentile is a little under 2mm.
To get to 1mm net worth at that age group, you have to go up to about the 80 percentile.
It seems you are correct that the 90 percentile shifts a fair bit at retirement age (65-69 is peak net worth) but it doesn't effect the middle very much, and you have to be > 20% to catch that 1.25mm number at any age group.
I don't think I agree. The article is not making generalizations about the wealthy. It's about the top 10% wealthiest and stating they own 90% of stocks.
If you wanted age normalized wealth, the top 10% would probably be a lot of rich kids whose peers have negative net worth. I'm sure that's an interesting cut, but it's a different topic.
Yes. This same kind of error also applies to racial comparisons. A large component of racial disparate in income is caused by age gap. One would assume that different races have the same age distribution, but in reality it is not. The difference is huge, see: https://www.pewresearch.org/fact-tank/2019/07/30/most-common...
That's the tip of the iceberg, a lot of privilege and inequality discussion marginalizes younger white people that would otherwise be interested in helping make society more egalitarian. At best, many people get a freedom from some distractions, but the term privilege does not convey that well, which is very counterproductive, so that chart could help a lot!
I think demonizing so called privilege is cultural suicide, because most of what "privilege" amounts to is parents caring for their children and passing on successful cultural values. You don't want to foster cultural movements that discourage this behavior if you want a functioning society.
Privilege isn't parents taking better care of their children, it's parents doing a better job at taking care of their children than others, and multiple other things.
I'll go along with your point. Demographics of the US skew heavily towards the old. If your hypothesis were true, you'd expect to see the wealth distributed roughly with age.
What hypothesis? The article here doesn't control for some very important factors. I refuse to be outraged until I see numbers corrected for non-outragous factors, like mobility.
While there is a correlation of net worth and age, there is no age band [0] where the median net worth is even 2/3 of the 75th percentile population net worth. [1]
Age is not a major explanatory factor in wealth inequality. (The fact that the mean income in the 35-44 age range is much greater than the median income at the 65-74 age range, that has the highest median of any age range, also underlines this.)
> it's not comparing Americans of different classes. It's comparing Americans at different stages of life. Or just the ebb and flow of income over and individual's life
no, what we should really measure is property, ownership. the richest people pay little to no income. many years ago, before i learned about today's economic system, i remember being impressed upon hearing that Steve Jobs only took a $1 salary. now i know this is just incredibly beneficial tax-wise (along with a bunch of other tricks that aren't available to the non-propertied class).
seriously all this talk about 'measuring income' or whatever is just a distraction from the underlying property systems and relations in our current system.
"In the coming years you’ll read a lot of columns agonising over how to ‘fix’ Silicon Valley. Most will be technocratic, evacuating politics from the discussion. This is, after all, the framing that allowed Silicon Valley to grow so powerful in the first place: a binary choice between technological development on capital’s terms, or remaining stuck in the past. But structural problems require structural solutions. Rather than relying on ‘ethical’ founders or investors to change the system, we need collective action to challenge it.
This will mean undoing the labyrinth of intellectual property rights, which are intended to protect corporations and commodify information. It will mean revisiting the funding model that gave rise to the ‘go-big-or-go-home’ culture responsible for so many wasteful start-ups, shifting away from the return-driven venture capital model, and towards a state-backed social entrepreneurship with public responsibilities.
It will also mean building worker power, within the tech industry and beyond it. Within it, the long-term goal must be a union culture encompassing all workers involved in production. That means not just the highly-paid software engineers but contractors packing boxes for Amazon, or driving for Uber, or cleaning offices in Silicon Valley should all have representation in decision-making structures. And beyond the confines of the industry, a wider-organised labour movement needs to offer resistance to technology being used to facilitate increased worker exploitation through surveillance or regulatory arbitrage.
None of this will be easy, of course. Reclaiming the emancipatory potential of technology will require prying it from the clutches of capital. But that is a worthy fight. If the task of politics is to imagine a different world, then the job of technology is to help us get there. Whether technology is developed for the right ends — for the public good, instead of creating a privatised dystopia — will depend on the outcome of political struggles."
The reaction then should be curiosity and a starting place for research, not the uninformed outrage that the article is peddling.
Once you start looking at the numbers behind this, it's almost guaranteed that the real picture will be less outragous and suggest different policy prescriptions than whatever you might think looking at the headline.
Or maybe you already know the details, and already know what we should do. But if so, you got your information from elsewhere, because the article doesn't offer much.
What this effectively means is, that ten percent exercises majority control over huge portions of the US economy. That ten percent is the group making decisions on how to direct huge amounts of resources created by our economy. Such a healthy democracy.
Pensions are a major stakeholder, more so than individual stock holders. Most people are invested in stock indirectly through pension funds. This is can in part explain why the fed and monetary policy has been so easy, in part to prop up the value of these fund.
I hope by pension you mean general retirement savings. Because only about 20% of American workers get a pension [1]. Also note that less than 60% of American workers participate in a 401k-type retirement plan. So saying that “most” people are invested in stocks this way is just barely true and kind of distorts the picture.
This. I keep seeing numbers like this article that simply make no sense when you look at the pension fund (and some other such institutional investors) capitalization vs total market capitalization.
Okay, I'll say it; good. Democracy is fine as a method to run a government, but democracy is a terrible way to run an economy. Not nearly everyone should have a say in what happens in the economy.
Democracy ought not be a meritocracy, but the economy should be, which means some people will and should be left out of decisions.
I would love it if the government could grow the number of people who, on their merits, help guide the economy, and there are groups of people who are unfairly barred from access to the economy and that is bad, but the idea that everyone should get a say in what happens in the economy is very much against the capitalistic principles upon which the US economy is built upon.
Before you can make this claim, you'll need to put your definition of merit out there, and additionally defend that the 10% we're talking about here truly has this meritorious status.
In a free-market system, merit is defined by your peers. If you can add unique subjective value to them, they will give you money in return for that unique subjective value add.
That's by and large a great thing, because it means that the people getting the richest are largely the same people who are providing the most value to others, and so it aligns incentives with useful production and useful work in a decentralized way.
We can zoom into examples to understand better. Why is George Clooney so rich? Because he added a little bit of value (say, $3 worth) to the lives of millions via his acting skills, and he got a slice of all that value add.
This is not to say it's perfect, and I could go on about why it's not, but the central point is that "merit" (i.e. income/profits) is defined by one's peers opinions about your unique value add to them.
More money might also mean you're just really good at colluding, anti-competing, price fixing/gouging, arbitraging, exploiting, socializing expenses and negative outcomes, or monopolizing.
It's extremely flawed and naive to think a positive balance sheet means a positive outcome for society occurred in the process of obtaining it.
That's why I said I could go on about why it's not perfect. I admit there's downsides, but I still view it as a great thing on net, due to the general tendency to align incentives with value provision.
It's not just "not perfect", it's extremely flawed. You didn't "go on" at all about its flaws or failures at measuring merit, and only provided a toy example of a superfluous mega-rich celebrity deserving his wealth while ignoring Hollywood's underhanded exploitation and accounting issues.
1. George Clooney didn't get rich from acting. He got rich from selling Tequila. Regardless, his children will likely remain wealthy despite never having been on a movie screen, much like the Waltons are among the top 20 richest people despite never having a job at Walmart.
2. Every year, fewer and fewer people get rich from having built something (labor), and more are just rich from being already rich (capital).
If in a free-market system, if you let the people with most wealth concentrate power, after n-years you are just left with a monarchy with a couple extra steps.
Counter point: It's a self correcting problem (on a long enough time horizon). If his children can't manage their money by providing value to society (albeit not in the way that most can appreciate), they will quickly draw down that fortune and be unable to pass it on to their own children.
Investing that money, or otherwise allocating that money to companies who can better use it provides value to society at large, and in return, the person investing will receive a return on investment to live off.
>Counter point: It's a self correcting problem (on a long enough time horizon).
To point to someone who has done the research, 'Capital in the Twenty-First Century', states that its not a self-correcting problem. Furthermore, I'd argue that index investing make it incredibly difficult for his heirs to lose their money. Anything short of a collapse American global hegemonic power means their wealth will be relatively safe. Furthermore, investing is not means of wealth redistribution. I can invest billions in Wal-Mart, but that will not motivate them to pay their cashiers a cent more. The compounding effect of the wealthy owning most of the industry through the stock market means their share of the ownership grows, leading to headlines like we see.
It's literally the basis for Thomas Piketty's 'Capital in the Twenty-First Century'. It's a dense book, but widely acclaimed. It was also published 8 years ago and the claims aren't controversial.
To say it's not controversial seems misleading. It may be widely acclaimed, but also hugely criticised. Wikipedia has a short collection of the criticism.
There are very few critiques of the empirical assertion that the capital share of the economy is not increasing, though. Most are on other parts of his thesis or argument.
Real estate (land to be specific) is a popular investment because it lets you extract economic rents.
You can build a dynasty around land because ownership is barely taxed. Land does not degrade by simply keeping it vacant. Meanwhile everyone around the land needs it to live on or to work or to extract resources. Inequality isn't driven by well deserved high returns, it is driven by monopolistic extortion where you cannot refuse even if you know you're getting ripped off.
I addressed this in another reply, but I find it funny that you questioned that point literally after showing an example of it to be the case. Clooney leveraged capital from acting to buy a tequila "factory" (AFAICT, he didn't run the company, he didn't make tequila, he didn't manage distribution, his name was just on it), and used that capital to make more money they he would have ever had from acting. But somehow #2 is controversial on HN.
>However, I include Worstall’s argument for a reason. It is true that some are more productive than others in an economy and it is true that this has always meant, and is likely now to mean, that those who are more productive do earn higher rewards than those who are less productive. In principle I have little argument with this idea: I have no difficulty with there being some differential in earnings within any society and think them inevitable subject to their being a safety net to ensure that all can have access to the resources they need to fully engage in the society in which they live (which means much more than having a basic material standard of living). Importantly though, what Worstall’s suggestion implies is that there are very obvious limits to wealth differentials, because the fact is that however clever someone might be the differences in productivity we humans have to offer is not that big.
I repeat, the differences in productivity we humans have to offer are not that big.
I agree in principal, but there are a couple big problems with this argument.
1) This only works if everyone starts at the same line. Obviously not the case while there's a huge variance in inheritance, education, influence, opportunity. If a 100m race has some people starting on the 50m line while others are on the 0m line, it's not a race based solely on merit. Some of the starters on the 50m will still lose to the 0m starters, but statistically they have a much better chance.
2) We don't live in a free market society. "Free market" is just an ideal (like communism or utopia is an ideal) that doesn't truly exist outside of a vacuum. Most societies (the US included) are a combination of free market, socialism, capitalism, cronyism, etc.
I'm not arguing for a different system than capitalism here, but if you're going to argue for our existing system, then you shouldn't conflate it with free market or meritocracy which simply doesn't exist outside of a lab.
Saying free market is a great system, is practically the same as saying unicorns are cool. For sure they are, but how is that relevant?
How could you falsify this claim? How could you identify, in the context of your definition of merit, whether the richest are really the most meritorious? It seems entirely circular to me.
It sounds to me like you're saying that all societal or economic value is directly linked to money.
As an example, do you think stay-at-home parents add no value to society (or if you want, let's say "the economy") because they are not paid directly for their services? Are charity workers or volunteers "merit-less"?
You don’t have to go back to the 40s for an example. Plenty of unpaid work that benefits society is done today by Americans, including raising children, caring for the elderly, volunteering at a soup kitchen, and even getting an education.
Honestly it always surprises me to hear this on HN, the idea that work isn’t being done unless it’s generating dollar value for someone. What is open source coding then? Not work because it’s not done under the purview of an employer for a salary? Not valuable because no one gave you a dollar for it?
That's obviously a foolish interpretation of money. The economy is a system that lets people trade their time for other people's time. Without an economy you would have to do everything yourself. However, an ideal economy doesn't give more back than you put in. Therefore what the economy offers is the ability to specialize. You get to decide how much work you want to do yourself and how much work you let others do.
From this perspective, the accumulation of money is merely the interruption of this specialization process. The idea of ascribing value to an interruption of a system that is otherwise trying to be balanced gives the impression that somebody is too lazy to figure out what they really want out of their life and they simply enjoy having the option even if it means that the other side is waiting for you to act.
It gets especially perverse during recessions where everyone is trying to acquire money for the sake of safety and security when all it really means is that you order people to stop working for the very reason that motivated you to save money, the fear of unemployment.
Not all value add is compensated, that's the concept of positive externality, and it's a market failure.
If we want to get really precise, we can say that people give other people money for any number of subjective reasons, but the large majority of the time it's because the person wants something from the other party that the other party isn't willing to do without compensation. So money most of the time represents subjective value add that wouldn't otherwise have occurred without it. Cleaning services, manufacturing, specific engineering work, construction, etc.
Honestly? I don't know, and if pressed I'd have a hard time coming up with a usefully specific answer, but I still believe what I do; that not everyone should be forcibly allowed to participate.
Maybe that's helpful? I do think there are marginalized groups and that should be accounted for (ideally, in my limited understanding of the problem, by raising those groups up), but I don't think "baseline" should be, "Everyone is equally involved in steering the US economy."
Yes, I believe something with low certainty, at least partially because I can't fully articulate it. That doesn't mean I don't believe it, however, and I can't think of a better way to grow my understanding of something than to take a position on it on the Internet!
Almost all of my beliefs/opinions are built on some form or another of sand. Certainty is the real mind killer, IMO.
In addition to this, OP should also prove that these people have others' best interest in mind. Without some sort of accountability, increasing most people's standard of living is irrational.
I've read enough early US industrial history and the history of the East India Company to see how this can get horrifying with a quickness.
> Democracy ought not be a meritocracy, but the economy should be
The Walton heirs have over $200 billion. I guess Alice Walton ($60 billion), who killed someone with her car in 1989, nine years before being charged with DWI for driving her car into a gas meter is one of those epitomes of meritocracy. Or the Koch heirs, the Mars heirs and so on and so forth. The economy is designed for the benefit of the heirs of the St. Grottlesex set, of this meritocracy you speak of.
Those seem like legal and not economic matters, unless you're saying all matters are economic matters, to which I'd carve out the matters that are legal as not meritocratic and therefore not "good" that we leave it up to "merit" (however that's defined).
But still, according to your economic meritocracy, it would follow that Alice Walton is of higher merit than, say, the totality of: your five favorite economic think tanks, the entire economic faculty at Harvard, and the CEOs of the Big Four.
Actually, scratch that -- Bezos dwarfs them all. We should defer to his wisdom first and foremost on all matters economic.
...yes? I don't see what the problem is with this. The people you've named own portions of organizations and therefore get to decide (to the degree with which their ownership allows) what those organizations do. I prefer that vastly over the idea of every organization being governed by popular vote.
I think you're getting stuck on the word "merit". It has context; there isn't some universal concept of the worth of a person being discussed here.
> I think you're getting stuck on the word "merit". It has context; there isn't some universal concept of the worth of a person being discussed here.
No, I'm not equating it to worth of a person -- that's why I chose to compare Alice Walton to economics departments and political think tanks and bank CEOs (who I'm sure are not always of the highest moral character). This is about economic merit.
You said this:
> Democracy ought not be a meritocracy, but the economy should be, which means some people will and should be left out of decisions... I would love it if the government could grow the number of people who, on their merits, help guide the economy...
I picked these examples because to me personally, it's clear that just because someone has acquired more capital, it doesn't mean that their opinion with respect to guiding the economy is more valuable. Otherwise, George Clooney is of higher merit in this context than the faculty members of top economics schools, and so we should heed his economic decisions and guidance accordingly. That doesn't strike you as... a little odd?
To put it another way, just because you do well at a game (e.g. "the economy") doesn't mean you should be the one dictating and guiding the rules of the game. It's a bit circular -- in what direction do you think such people will guide the rules? What incentive would the winners have to change the rules?
Why are we talking about the rules of how the economy operates in the US? That is not and should not be governed by meritocracy, it should (and is) governed by laws, which are decided democratically.
Jeff Bezos cannot (or should not) unilaterally decide how corporate law works. He has a vote in who governs, legislates, and judicates, just like you have a vote in who governs, legislates, and judicates, and that's it. This is what I mean when I say "you're getting stuck on the word 'merit'".
I believe it's okay that not everyone gets a say in how Amazon is run. Everyone does get a say in the things Amazon is allowed to do in the US economy. Those are different things, though it seems you're conflating them.
First, the two are inextricably linked and always have been. It has been demonstrated time and time again that capital begets political power, so these people are dictating the rules as well. Plus it's naive to think that those that simply "run the economy" (your language) are not affecting everyone else's lives in our society.
But even ignoring this point and going back to an idealized world, maybe I'm misunderstanding you -- can you spell out what you mean by "guide the economy" or making decisions about the economy?
Simply the 10% who own 89% of stocks influence the economy by exerting influence over those organizations they proportionately own.
A company's shareholders don't get explicit control over the entire economy or anything so absolute, they simply speak with whatever control they have over the private organizations that then, themselves, indirectly influence the economy.
I don't think 10% of America should literally have extra voting power in elections, and despite your allusion, they do not.
No matter how much you decry "money has influence in elections" people are free, in a democracy (as implemented by the US), to vote how they want. Any argument around, "People get manipulated" is a non-starter; as long as nobody is literally casting their ballots for them, they are free to choose to harm themselves. It's stupid of them[1], but that's democracy for you.
I think you’re confusing the word “merit” with the word “ownership”. Merit cannot be measured objectively, so you are using ownership stakes in large corporations as a proxy for merit. But you haven’t shown that ownership in a corporation is correlated with merit. You’ve just automatically assumed they have merit because the corporations they own are large and successful, and it seems you’ve defined merit by owning a large and successful corporation. This is circular reasoning, unless you want to try for a better definition of merit.
But large and successful corporations are large and successful precisely because of the work of tens of thousands to millions of people. You are trying to say they shouldn’t have a say in our economy? In the work they do? Even though they are the ones on the ground doing actual work, building actual products and technologies with their hands?
Amazon and Walmart do not exist without this army of workers to make them operate every day. Jeff Bezos could die tomorrow and Amazon would continue unabated, just as Apple did the day after Steve Jobs died. Why? Because Amazon and Apple and Walmart are not one person or even one family. Why then, should we give such an outsized role over our lives to single individuals at these companies, when we can’t even prove the success of these companies is due to their individual “merit”?
It's not circular, it's simply causational. If a corporation does well, the owners of that corporation have demonstrated their merit. The goal is not to reward work, the goal is to reward risk. Owning a company is risky. Simply working at a company is not risky.
Successfully taking on risk and navigating from that risk to a successful and sustained outcome is what defines merit.
It is perfectly acceptable that the workers who do not take on risk through ownership at Amazon and Walmart do not get to have a say in what Amazon and Walmart do. It's also true that both Amazon and Walmart pay many of their employees with shares of their company, for this exact reason. Employees who become (small percentage) owners of a company demonstrate merit proportional to their risk, and generally proportional to their individual contribution.
It's not perfect, but if your goal is perfection, you will live the rest of your life dissatisfied and frustrated by inequity.
> If a corporation does well, the owners of that corporation have demonstrated their merit.
> [merit is defined as] Successfully taking on risk and navigating from that risk to a successful and sustained outcome
I'm not looking for perfect, I'm looking for well-reasoned. This is not a causal relationship, it is definitional. A tautology. You provided a definition of merit here and then claim that anyone who meets the definition has merit. But so what? This is a circular argument because you have not proven that those people are responsible for the success of the corporations they own. In order to prove a casual relationship, you will have to control for all other factors, including the efforts of other employees and even random chance. And this better be a very robust analysis because if you want to put these people in charge of our lives due to their supposed "merit", they better damn well have it.
Because successful and sustained operation of Amazon is achieved by all workers collectively. The owners of Amazon are not necessarily doing the work of Amazon. They are not even directing that work in many cases. I'm an owner of Amazon and I don't do anything for them. So which owners were responsible for the success of Amazon and how do you determine that? What is the threshold for being attributed merit for Amazon's success? 10% of the company? 20%? A majority? A plurality? You have offered no way to objectively figure this out, and instead defined merit in vague terms. What is "successful"? What is "sustained"?
> Simply working at a company is not risky.
Thanks in large part due to workers having a say over the economy! Travel back to the early days of America or even the early 20th century, and you'll be in a world with no worker protections on the job. Unsafe work environments, no regulations, long hours, child labor, no breaks, no leave, no healthcare, no paid sick days, 6 day work weeks, indentured servitude, private corporate armies, company towns, company stores ... I could go on and on. Oh and let's not forget to mention slavery. Keep in mind the same logic and reasoning you are applying here could have been used in the 1800s to put slave owners in charge of the economy. ("Look at how successful their business is! They should be running the entire economy!"). Here is a taste of the climate created by the very same kind of "meritorious" business owners that you want to put in charge today:
"Because the doors to the stairwells and exits were locked[1][7] – a common practice at the time to prevent workers from taking unauthorized breaks and to reduce theft[8] – many of the workers could not escape from the burning building and jumped from the high windows."
These are the kind of thing that happens when you let "meritorious" owners of corporations do whatever they want. These are the kinds of ideas they come up with. So if you want to put these people in charge of our lives and our economy you will also need to somehow assure us that this kind of violence against workers will not happen again. Would it interest you to know that "CEO" is the job title of a disproportionate number of psychopaths? Take a look at the psychological profiles of a board room and a prison cell block -- you won't find much of a difference in frequency of psychopathic tendencies between the two groups. If we define merit as running a successful corporation, and we select people from that pool to run our economy, you're going to be selecting a disproportionate number of psychopaths in the process. My fear would be that they would go right back to putting chains on the doors and conducting violent attacks against striking workers given the first opportunity.
Reading the argument he does seem right. Simply being the owner of something successful does not prove that you caused the success, and if your definition of merit is "owning a profitable stake" and nothing else then you haven't actually shown them to be meritorious, just asserted it.
He isn't right; owning something successful doesn't prove you caused the success (and I never said it did), but it is a strong indicator you caused the success, and more importantly past successes are leading indicators (not absolute assurance, however) of future performance.
Acting like I claimed some "proof" or "absolute certainty" around this topic is disingenuous and manipulative, which is why I stopped engaging with him, and honestly am suspicious of you as well.
Telling me that I believe something I do not is not a good way to interact with others, and it's not likely to breed positive discourse.
This topic is a lot fuzzier than the language being used by you and the other commenter, and it's not possible to have a civil conversation with people who don't get that.
The issue is that we have a spiral - past successes may only be a predictor of future performance because of the privileges we endow to successful people.
No one is asking for absolute certainty, people are asking for a solid argument, so far they seem very soft. If using specific language causes an argument to be impossible then the argument itself is weak - I assure you that fuzzier topics can be discussed with more specific language, it just has to be thought out carefully.
An argument isn't weak because it relies on specific language, it's specific. If we can't agree on what the word "merit" means (or indeed "weakness"), it's useless to continue to discuss what is and isn't meritorious (or weak).
That is what has happened here, along with a fairly significant number of willful misrepresentations, to the point of assumed malice, of what I've written.
I was willing to leave it where it was since you said "cheers", but this comment is a direct about-face from what you said earlier. Now apparently I'm not having a civil conversation? I didn't attack you or your character personally at all. I engaged with your comment fully and addressed your points. I haven't used any inappropriate language. So I take issue with your characterization of my engagement here.
> This topic is a lot fuzzier than the language being used by you and the other commenter
You started this whole discussion with unsupported, absolutist assertions as to the model for the economy you would prefer (in this whole discussion you haven't provided any evidence to support your claim that democracy is a terrible way to run an economy). This is the tone you set initially. The topic became "fuzzy" when you were pressed and your bold assertions turned into "beliefs".
I reply only to say you're not accurately portraying our conversation (or even what I said in the prior comment), and it's a little sad you think you can lie here now, when what you and I wrote is directly above.
Your last paragraph pretty much sums it up for the US.
The primary objective of the US government for its people should be to provide everyone with the same basic opportunities. What they do with those opportunities is up to them, like it is in any other country which already does these things.
Access to education and universal healthcare + a livable minimum wage at the very least.
Once your children are fed, happy and healthy and you don't have to work 2 jobs to make ends meet, you have more time to spend with your kids and provide them with an upbringing which will allow them to have a fair chance at becoming one of the people who make those decisions.
There's obviously a major influence on US democracy coming from the decision makers of the "economy".
So the question is, which is more important, and to whom? The majority doesn't have much of a say in the economy unless they band together, which is nearly impossible in a diverse and (intentionally) divided US.
A flawed democracy also means that the kind of drastic change that's needed to correct this imbalance can't happen.
>The primary objective of the US government for its people should be to provide everyone with the same basic opportunities. What they do with those opportunities is up to them, like it is in any other country which already does these things.
>Access to education and universal healthcare + a livable minimum wage at the very least.
I'd add that doing so is also smart economic policy and is good for capitalism.
By expanding the pool of folks who are decently paid and educated, we expand consumer spending (which is ~70% of the US economy) and the skilled labor pool.
Both of those will encourage the broader pool of healthier, better educated people to engage in entrepreneurship, growing and stabilizing the economy over the medium to long term.
And even with such spreading the wealth, the top 10% will still be plenty wealthy. It's a win-win, IMHO.
tl;dr: There are compelling economic/capitalistic reasons to increase wage floors, enhance the social safety net, improve edudcation and generally spread the wealth around, not just those around societal good.
The surprising part (maybe it is not very surprising) is that economic elites advocate for policies that are bad for economic growth in the long run. It's surprising because the policies that will result in economic growth are quite obvious. It's unsurprising because those who are in power don't want to give it up for the greater good.
>Not nearly everyone should have a say in what happens in the economy.
I mean sure, democracy isn't optimal for selecting the best people, but do you think those 10% that do own most of that stock were selected by their skills and abilities?
The US was founded as a rebellion against aristocracy.
However, in 1825 Jefferson noted that, much like today, the country was becoming increasingly controlled by what he termed 'monied in corporations' and therefore seemed to be eroding the achievements of the revolution:
[T]his opens with a vast accession of strength from their younger recruits, who having nothing in them of the feelings or principles of ’76 now look to a single and splendid government of an Aristocracy, founded on banking institutions and monied in corporations under the guise and cloak of their favored branches of manufactures commerce and navigation, riding and ruling over the plundered ploughman and beggared yeomanry. this will be to them a next best blessing to the Monarchy of their first aim, and perhaps the surest stepping stone to it.
> Not nearly everyone should have a say in what happens in the economy.
Alternative take: everyone already does have a say in what happens, as they participate. Nobody gets to dictate their own terms, though, but neither does anyone in politics.
Fair enough, though I think the point of contention is that 10% of Americans have 89% of the say, which means the remaining 11% gets divvied up amongst 90% of people, which isn't a lot per-person, comparatively.
But generally yeah, I do think everyone does get to participate, and that's a Good thing.
The other consideration is that apparently a lot of Americans have their wealth tied up in their primary residence. It's a lot harder to own a lot of stock when single family homes cost a million dollars, and you have to live there to get access to the metro's Good Schools.
Do you still think it’s good if you aren’t part of the 10%, nor do you own part of the 11% the 10% don’t own, and when you try to amass wealth policy created by and for the 10% harm your meritorious attempts to improve?
I have seen some youtubers use the word central planner as an insult for government institutions. In my opinion there's a different class of central planners that nobody really gives a damn about. Billionaires influence governments and also have an outsize impact on the economy either by concentrating wealth and thereby denying that wealth to others or by directing their wealth on things that they personally care about but the majority of the economy does not.
The conventional trickle down hypothesis is that giving the rich money lets them do their job more efficiently because of centralization. That is basically a belief that only people who do not believe in a liberal(or free) market would have. The idea that 300 million decision makers are worse than a handful of billionaires is absurd. If the work of these billionaires is truly needed then let people make that decision for themselves and give them the option to avoid them.
Potentially dumb question: once you own a certain percentage of public stock of a company, do they start contacting you for board meetings or decision-making of any kind? I think I understand your comment, but I'm curious what real-world examples of this look like.
Yes, every voting share (most shares are voting shares but there are some exceptions) is worth 1 vote, and you receive invitations to the shareholder meetings if you have even 1.
> Potentially dumb question: once you own a certain percentage of public stock of a company, do they start contacting you for board meetings or decision-making of any kind?
Well, most decisions are outsourced to the board members, who's membership is the main thing shareholders vote on.
Mandatory reporting kicks in at 5 percent ownership. At 10 percent, the SEC considers you an insider[1]. Before that, I doubt board members even know you exist unless you talk to them first (and they aren't taking your calls or mine).
Indeed, the sec and the company probably want to know about you, hence the 13D. There's also a bit where you can only hold a certain portion of a bank before being designated a bank-holding company.
I don't know what scrutiny that brings, but Warren Buffett has been careful not to get Berkshire Hathaway designated it. I believe the limit is/was 10%, but then you could ask the Federal Reserve for a higher limit, which they did because of Bank of America or Wells Fargo I believe?
I don't know a tremendous amount about it, but from what Buffett was describing, it wasn't the fed asking them about their bank holdings, they were asking the bank about them.
Shareholder power is diffuse, a lot like voting for your congressman is. If you hold over 50% of the vote there are more tools available but then your getting lawyers involved. Sometimes corporations are organized in such a way that even 50% doesn't give you effective direct control without very unpleasant side effects (e.g. poison pills).
Well, not really. Most of this is going to be in some kind of managed funds where individuals aren’t exercising voting rights. So it’s a much smaller subset that exercises control
Democracy is about democratic control over the government, not democratic control over all individuals or aspects of life.
It's not injustice that people can't vote to control what you learn, read, eat, or do. If you write a book, our government isn't suddenly not a democracy because people can't vote on what you write even though you technically now have more power over other individuals since you can control what goes in your next book.
By funding campaigns, lobbying, running think tanks, owning media reaching millions of people, having people of your company sit in government agencies (...) economic power quickly translates to political power.
Intelligence translates into political power, being extremely charismatic translates into political power too. Should we start giving lobotomies to people that are too smart and throwing acid on the faces of people that are too good looking so that they can't exert their political will on others?
That isn't a counterpoint, it's completely ancillary to what we are discussing. Whether someone is affected by something does not matter. The only thing that matters are rights. People have freedom and the freedom to live their life as they see fit as long as it doesn't infringe on the rights of others.
Yes, I was suggesting a right: The right not to be effected by decisions you're not involved in making and the right to be involved in all decisions that effect you. I see that as necessary for freedom and thus any alternative infringing on that right.
How about the right to a decent life? You don't see the decimation of the middle class as a problem for a democracy?
I'm not sure what you're getting at, technically you may have a point (I'm giving you the benefit of the doubt here) but at the end of the day when all resources are owned by a few, things start to break down.
Everybody has the right to achieve a decent life. What you are actually asking for is the right to have material wealth. Which isn't a right.
>technically you may have a point (I'm giving you the benefit of the doubt here)
I don't want the benefit of the doubt from you. You advocate robbing people and spread hate against a group you don't like because you don't have enough toys to make you happy. You are just a part of a mob that has repeated the same mistake countless times in history, with your beliefs you are practically not an individual.
>Everybody has the right to achieve a decent life. What you are actually asking for is the right to have material wealth. Which isn't a right.
I don't see how you can so easily divorce the two. If I can't afford to send my kids to school - do I have a decent life? If I can't afford to see the doctor, do I have a decent life? I'm not arguing that everyone should be afforded to drive Lamborghini's, but that the American project of guaranteeing individual liberties and freedom is predicated on some wealth distribution; otherwise the working class are effectively slaves to their own existence.
Democracy is a means on how that power is utilized in order to control the individual lives of others. You wouldn't reject that standard for any other law; you wouldn't allow rich people to openly commit murder because you didn't want to infringe in their individual liberty.
Everybody has the right to a achieve a decent life, yes, I'm not advocating giving a Mercedes Benz to any street bum. But the former is becoming harder and harder these days solely because all resources are in the hands of the few who do not contribute anything, risk nothing and take in more and more.
And I advocate robbing anyone? No, I advocate pointing the finger to the robbers instead. I withdraw the benefit of the doubt I have given you earlier, you are very unreasonable and dogmatic in your views. Look around you from time to time, you're going to see a lot more people failing who should have not, hard working people with good work ethic.
Or, you could just simply argue that 10% is the group in the best position to beat inflation while the rest of us get poorer.
Not taxing the rich, capital gains as income, seems to contribute to inflation about as equally as government social spending due to both second and third order effects of policy influence and economic consequences.
Not taxing the rich, capital gains as income, seems to contribute to inflation
I'd say you're half right, here. The Fed prints money spends $80 billion a month on treasuries and $40 billion a month on mortgage backed securities, so if you're a government contractor or you have a lot of real estate assets, you're effectively robbing everyone else's savings and devaluing their wages.
If all you want to do is beat inflation you can just buy stocks instead of saving money. The real problem is that people get higher returns than inflation. Often higher returns than the growth rate of the economy as a whole.
The idea that inflation is killing us is simply not true.
Your argument only makes sense if those stock purchases are treated as regular reoccurring income, such as exchanged from the market to liquid assets, sufficient to cover the increases of daily expenses. For most people that is certainly never the case.
But wealth and income (from work) don't have anything in common. You may earn those 100k year after year, but it would still take quite a while until you land into the wealthiest 10%, if ever.
While I take your point that wealth is always more unequally distributed than income, income inequality and wealth inequality are definitely related. The degree to which they're related depends a lot on the tax and regulatory regime. In the United States, income inequality is high relative to most other Western countries, and the top 1% and top 0.1% shares particularly so; this means that if you're at the top of the income distribution you can become wealthy faster. In a country like France, where top marginal tax rates are higher, executive compensation is lower, and estate taxes are less progressive, inheritance and bequests play a (relatively!) more important role in the wealth distribution.
If you contribute 2k a month at 7% interest that would take you 23 years. A long time yes, but certainly achievable on a 100k salary. Of course I know the interest rate might not be that going forward, but the point still stands.
No, because in your scenario the people who have $1.25M in assets now are going to have $6M in 23 years (invested at the same rate), so these high earners still won't end up in the top 10%.
This is, I'm sure, is what the parent means. Compared to people with capital, people on high incomes are always behind.
If you earn more than average, spend less than your peers, and invest wisely then you might move up a bit on the wealth scale, but that's it.
I think the idea is that some of the people that have $1.25M now are not going to be around in 23 years, and that money will have gone to [inheritance, eldercare, etc], so who makes up the top 10% will change simply because of demographics.
harder to make 100k 23 years ago than it is today. by the time you finish a 2k/mo journey you begin today, 1.25M will be no longer be the cutoff for top 10%
Say you live in NYC, you have a stay at home partner and 2 kids.
Your living paycheck to paycheck.
I'd consider anything less than 200k for a family to be working class. As in your unlikely to be able to survive for extended periods of time without working.
If your monthly expenses are 9k, even your take home is 11k your in for a ride if you lose your job.
Similarly, if you make only $2M/yr and live in a golden penthouse in downtown Manhattan, you’re barely scraping by. Why doesn’t anyone think of these poor souls?
If your job requires you to be in New York I'm not clear what else you can do.
Income doesn't scale well in America. If anything taxes are way too high on middle class people. No one making less than a million a year should pay over 30% in taxes.
The problem with the 10% is that it conflates households who barely get by, who make 100-200k per year with others who make way more than that. 100-200k in SV or say NY is really not that much, definitely not enough to be considered wealthy.
I've read about a few middle class folks in that range who tanked rapidly with massive debt and foreclosures when a medical misfortune hit them.
and the former Soviet union wasn't a system with independent actors with their own interests?
people seem to think the Soviet economy was ran by a single person decided everything about the economy. while in practice its actual implementation was rife with personal and organizational infighting to reach Stated or unstated goals.
How about we let more than 10% control the economy? One would think that the ideal of a free market at least exists to involve as many participants as possible.
> If so, you think a few hundred people who won a popularity contest and never actually created anything should be in charge of stuff they didn't create? Is that democracy?
By definition, yes.
Another way to phrase this question would be "would you rather power (economic, political, etc) exist in the hands of a person that you chose to wield it, or in the hands of a person who seized it for themselves?"
Definitely the person who "seized" it by working hard to get into that position, as opposed to someone who's job is to be popular.
But even so, "seizing" is not the right word, it implies they somehow stole it or gained that position forcefully but as far as I know the playing field for success is more or less level (for equal beginnings) and you could very well become that next person to "seize" power, which feels much more democratic to me than elected officials.
If you look at the "most powerful" people in the economy today, most of the big names you will think of were nobodies 40 years ago. Who was Jeff Bezos then? Mark who? What's Google?
>won a popularity contest and never actually created anything should be in charge of stuff they didn't create? Is that democracy?
Modern democracy is when a few hundred people win a popularity contest and don't actually create the things they are in charge of, yes.
The issue at hand is that those few hundred are mostly beholden to an impossibly moneyed class who don't need to do anything in order to continue to amass wealth and power; admittedly most of them never created any of the things they're in charge of. Some of them do things to speed the increase anyway, often at the expense of the masses, or even the few hundred.
> The issue at hand is that those few hundred are mostly beholden to an impossibly moneyed class who don't need to do anything in order to continue to amass wealth and power
It's not have the moneyed class are particularly powerful, but instead politicians are spending all their political capital on infighting rather than meaningful work. As a result, they heavily prioritize maximizing short term political capital, which is why we end up with so many tax cuts and spending rather than regulation or reform.
It wouldn't be that difficult to set up a grassroots organization that raises more money to lobby for a carbon tax than oil companies spend on lobbying for subsidies. Even so, politicians would still keep oil subsidies and merely only pay lip service a carbon tax because the former boosts the economy in the short term, and the latter is the opposite.
It is true though that the wealthiest politicians are also in very powerful positions in our government. The recent tax law was passed by multimillionaires in congress and signed by a billionaire president. As soon as he signed the bill into law he went to his private resort in Florida and told all of his wealthy members “You all just got a lot richer”.
Does this happen because of infighting? Or because wealthy people are deliberately using the government they control to make themselves wealthier? These things don’t just happen.
Sure, tax cuts to the moneyed class, and "bread", er, spending designed to benefit their holdings, or mollify the masses such that they can continue to enrich the few hundred.
The reason politicians in the US engage in such shenanigans is that those wedge issues are the "circuses" that allow the status quo of imperialist militarism, supported by both parties, to continue. Is it mere coincidence that neither party opposes the health-industrial complex, or the military-industrial complex?
>It wouldn't be that difficult to set up a grassroots organization that raises more money to lobby for a carbon tax than oil companies spend on lobbying for subsidies. Even so, politicians would still keep oil subsidies and merely only pay lip service a carbon tax because the former boosts the economy in the short term, and the latter is the opposite.
Isn't it more parsimonious to conclude that the reason is that the grassroots organization can't keep up the flow of money in the way that the few hundred can?
> Is it mere coincidence that neither party opposes the health-industrial complex, or the military-industrial complex?
At the end of the day, if the government really wants to do something, corporations have no choice but to comply, like with the Sherman Antitrust Act or the lockdown during the pandemic. There's nothing stopping them from opposing the military-industrial complex or the health-industrial complex outside themselves. They just don't want to because neither would grant them any short term political benefits. Both parties share a hatred of Big Tech, but they still can't get anything done because they hate each other more than they hate Big Tech.
Er, when's the last time the Sherman Antitrust Act got enforced? Given that last time, are there any modern corporations that would seem to deserve the antitrust treatment, but aren't getting it for some reason? How much are those corporations donating to Congress? Enforcement just doesn't happen because then the money train would stop.
This ain't exactly parsimonious. You're going on about "political benefits", but why introduce additional complexities like that when the bribery uh lobbying er aggressive donation strategy is public knowledge, super obvious, and almost entirely bipartisan? [0][1] This doesn't even include Big Oil, Big Pharma, Big Ag, etc... It makes me uncomfortable, too, but pretending it's about politicking is just silly.
[1] This doesn't apply to the most recent presidential election. Note that most of the cash went to Democrats. I can't really blame them. My thesis is that big corps lobby the gummint in order to ensure Good Business; it's sensible that the big corps might realize that another term of Trump might be more disruptive than beneficial
Non-founder executives with MBAs often have indistinguishable performance from government drones in spite of requiring 100x the pay. Their class is that of extremely expensive good luck charms whose primary responsibility is to avoid doing anything too stupid. Successors in the C-suite that add real value to the company are a rarity: Apple got visibly lucky on this front.
How about some gentle nudges to a more even wealth distribution, enabling more of the middle class to own capital and participate in economic decisions?
You could also argue that 0.1% is directing all of the laws surrounding our economy...and those are our elected leaders. I'm not sure they are any better at figuring out where to direct the resources than those 10% are.
Haha, keep going. It's not even the leaders of said corporations. They report to the Board of Directors and they in turn report to the investors.
The wealthy who own large portions of the controlling interest in these companies are sometimes the visible leaders of said corporations, but many of them live out of the limelight and control the rest of us with puppet strings.
In theory...but despite the sub 20% approval rating of congress over the last decade the same people keep getting voted into power. If you don't like the rich abusing their power...don't buy their product. Does it suck to not use Amazon...sure, but making an impact is not easy.
While this is true, it's not true to a lot of people: politicians and us regular-folk alike often equate the stock market's performance to the state of the economy (hence why this is a saying at all).
I like to think of the stock market as an insight into wealth-transfer (from the poor to the rich, obviously... it doesn't flow any other way in the US at this point). When stocks do really well, especially those of service/retail companies, the already-rich are getting richer, generally at the expense of the rest of us.
> I like to think of the stock market as an insight into wealth-transfer (from the poor to the rich, obviously... it doesn't flow any other way in the US at this point).
That's not true. Sam Walton and Jeff Bezos got rich by improving the lives of their customers. You might complain that the improvement came at the cost of exploiting workers. I disagree, but for the sake of argument I'll concede at the margins Amazon and Walmart could pay more. But the bulk of their wealth came from 1) them stealing it from other capitalists, keeping a portion for themselves and passing the rest onto their customers; 2) creating it ex nihilo and dreaming of something (AWS) that never existed and creating it.
It depends on how you define "improving the lives of"...
Amazon only won the game by undercutting others in the market to the point where they couldn't realistically compete. But those other market players were employing a ton of folks around the country. That's a huge part of what made Amazon's prices unrealistic for brick & mortar stores: people & infrastructure _in the communities they serve_. I fail to see how eliminating jobs & competition does anything other than consolidate wealth and (by not paying those employees) solidify the direction of transfer of wealth in the poor -> wealthy direction.
I think people really misunderstand the effect of moving commerce online. Communities need local services. Communities need goods available locally. Moving employment opportunities away from communities creates a higher barrier for entry into the job market, because now someone needs a car and/or hours-per-day to commute to get to their job.
This isn't even to mention the harm Amazon has done to its employees and contractors (folks in distribution centers & deliver-people have had a lot to say about the working conditions).
That CNBC article is unbelievably misleading. If you dig into the sources, it links to the actual report [0] where they state that 80% of households paid federal income or payroll taxes:
> Remember, this reflects only those who pay no federal individual income tax. TPC estimates that while the number of households paying neither payroll nor income taxes also rose significantly, roughly 4 out of every 5 did pay one of these two taxes.
The trick is that "income tax" is used as a technical term in the headline, while the colloquial use of it is quite different (average readers would probably consider their payroll tax to be "income tax").
I don't think that is really misleading, at least I wouldn't consider Medicare/social security as a part of my federal income tax. When I think of income tax I think of tax brackets and deductions, not payroll taxes which are deducted before I ever receive any income, and which I never really have to deal with.
Based on the headline, I would have assumed that 57% of people had enough deductions/low enough income to be below the bottom income tax bracket. Which is correct, based on what you said.
Even as a technical term, income has like 5 different meanings and contexts in the tax code, only sometimes distinguished by adjectives such as "ordinary", "adjusted gross", "modified adjusted gross", etc
So its very easy to use this to your advantage and appeal to emotion, when convenient, or pass tougher tax laws that never affect you, which is even more convenient.
Key word “federal”. Why specify what specific tax it is? Does it not muddy the waters vs talking about taxes overall?
I did an anecdotal test with a few people near me. They read this as those people pay no taxes. Most people aren’t thinking about the specifics of state, federal, FICA (SS + Medicare), sales, property, and more.
I can’t think of any good faith reason this is done.
Right, but the misleading "Don't pay Federal Income Taxes" trope purposefully ignores that they do pay Federal Payroll Taxes -- which per your chart is another 36% of government revenue.
It doesn't make a lot of sense, but the fact of the matter is that the phrase "income tax" as commonly used does not include payroll taxes. "Income tax" refers only to the tax on "taxable income", i.e. your net income after deductions and credits. Payroll tax, by way of contrast, is taken from the very first dollar you make, so the only way you can avoid paying that is if you are unemployed. Saying that "61% of Americans do not contribute to the pool of money that is spent by the federal government as a result of their income" is tantamount to saying that 61% of Americans are unemployed, which is plainly not the case. (BTW, "income" in the sense of "income tax" does include dividends and capital gains, which are not subject to payroll taxes. So it is possible to make millions while unemployed and pay no payroll taxes. That is actually not uncommon. In fact, it's the norm among retired people.)
For others, lisper is replying to the original version of the GP comment which stated that federal income and payroll taxes were one and the same for the 61% number.
Yep, I was 100% wrong, and felt I should bow out of the conversation as a result. I left in the research that made me discover how incorrect I was, to help guide others.
It is customary in cases like this not to delete the erroneous comment but rather to add an [UPDATE] tag at the end to add a correction. This keeps the original thread of the conversation intact. There is no shame in making mistakes. Everyone does it.
You should add an update to the 43% comment as well to say that percent is only true for 2020 and 2021. Every other year it is usually below 25%. Including going into the future with their simulation. I find a technically correct statistic that helps the same narrative as the incorrect/wrong stat is possibly even worse.
Like the sibling said. It should be an update or edit. Not a change of the comment entirely.
Hope you can make that change as there are a lot of comments that have replied to you.
Cheers for acknowledging you made a mistake. Like many others. That is sometimes hard for me to admit.
Edit: I just looked at this and other articles. They all say to be aware of how isolated 2020 and 2021 are due to the stimulus. I believe it is bad faith to put 43% as the number when for every other year, the number is usually below 25%.
EDIT: This to me is another indicator of the narrative pushing and stat specifying that muddies the waters.
—-
It would be quite helpful if the net worth/wealth of individuals who don’t pay either is given as well. When that 43% figure is pointed out. Generally people only think of lower economic class people. Not situations like the previous president not paying taxes for a number of years.
Otherwise all these stats still do not change my original point that they all muddy the waters and people assume the stats are only referring to lower income individuals or “leeches” who are of lower socioeconomic levels too.
The report says that the % of people(tax units) who didn't pay either in 2020 was 20.5%.
The 43.3% was the % of tax units that had a net negative income and payroll taxes (thought I doubt this included the employer side of the tax which for economics purposes falls on the worker). But that was also the Covid year.
Most years it's 25%-22%, which doesn't seem high for the poor, the disabled, and the retired.
The question I have is how to have policies that don’t hurt that 16.5%. It seems unfair to go after the elderly and take away the money they have worked hard to save. They are already being hurt by inflation, which sits at about 5%.
That's not what your link says. The final rows are "don't pay either" (20% of tax units). The one you quoted is from the 2020 data for "Zero or Negative Sum of Income and Payroll Taxes".
Your total tax liability can become zero, even post the 7-ish% Social Security and such, due to the EITC and so on. For example, if you make $20,000 / yr but have two children (made up numbers), you probably end up with a sum of zero.
The $300-600/week/person benefit counts as part of that sum (plus the one off checks). So you could have Federal taxes of say $2000 and then benefits of $10000, resulting in a net transfer (sum of "zero" is probably not right, <= zero).
I do not understand your point. The parent is saying FICA/payroll taxes are 36%. That’s revenue for the federal government and some of it is spent by the federal govt.
So I do not understand your first sentence. Maybe you can clarify.
> They do not pay Federal Payroll Taxes, because those are considered Federal Income Taxes. Why would they be different? Taxes come out of their paycheck, of which they get back from the government when their taxes are due.
> The point is that 61% of Americans do not contribute to the pool of money that is spent by the federal government as a result of their income (though they do pay as a result of sales and other taxes).
Half of payroll taxes are paid by the employer. The other half are paid by the employee.
And if the employer wasn't paying that half, they might pay at least some portion of that to the employee. And employers don't pay any payroll tax for non-employees.
In your effort to create a false dichotomy you have ignored several factors and points.
15.3% is the FICA factor (assuming not above income cap), split evenly between employer and employee. Add on top how the state, municipalities, school districts extract their payroll/income taxes, which can be 100% on employee, 50% on employee, 0% on employee, or none of the above. In Texas, it is 100% on employer. In Ohio, the split mixes and matches with some of the entities charging the employer and employee. Ergo, it's not always a 50/50 split between employee and employer.
In the end, it is a wash whether applied to employer or employee. FICA extracts the same amount, and other entities will extract their amount. Reduction by the employee or employer via credits are typically not feasible or are strongly engineered against.
Thanks, and this is my last comment on this thread. Have a good day.
Right and so what does saying this achieving? There is still so much nuance as to, in my opinion, make this fact practically useless.
There’s no breakdown of capital gains taxes. Or how much taxes are not captured because of loopholes or tax benefits that go to this segment or that segment of income level or wealth.
OTOH, I don’t know how many services come from local government that isn’t the federal government.
These are simplified examples/points. The point remains both the original stat and this one portray a skewed narrative.
I don’t think this changes anything for my original comment. One could say it even bolsters the case as it is another example of how misleading a quick stat can be.
But the thing is that if americans who don't pay taxes don't own stocks and americans who build most of the social system, the top 10% who pay all those taxes, also own stocks, it might compel someone to say... thanks, rather than "fuck you"... ?
I don't know, if you just redistribute ALL the wealth by murdering the 10% to the rest, what do you think will happen to the taxes ? What will happen to all that "the rich don't pay enough", when actually they paid everything, when it's time for YOU to pay ?
I think that's what all these people in the thread hint at.
I know that’s what people believe and hint at. That’s the point of the original statistic. To give this distorted unproven worldview.
Who do you think does most of the work across the country?
Stock owners aren’t actually doing much. They also aren’t paying high rates of taxes.
why wouldn’t one of these people think why is income tax different than capital gains tax to the extent it is.
Or why their limited money doesn’t allow them to earn money just for having money. While those top 10% can avg close to 10% a year on their saved money in the form of investments (before inflation, fees). Yet there’s no wealth tax or any other way to not make things seem illogical that the mere fact of having money begets more money.
Can these questions not be asked before either thanks or fuck you.
Why is the title to the thread just as practically useless? It seems less useless to me. It is at least giving some semblance of the high levels of wealth inequality.
corporate and payroll taxes are all paid by employees depending on elasticity, their income would be higher if the taxes didn't exist. True for estate tax.
Wages are sticky because people generally don't like job hopping. Over time they absolutely lead to higher wages as firms compete for employees.
As far as corporate tax incidence, the literature is pretty clear that they reduce wages. They reduce return on capital too, some estimate that a $1 corporate tax costs capital 60 cents and labor 40 cents from what I've read. Some estimates are 50/50 though. https://www.aeaweb.org/articles?id=10.1257/aer.20130570
Daddy Warbucks learns that the government is raising corporate taxes. He goes and tells his workers the government has cut their pay. He has no choice. Business necessity.
Daddy Warbucks learns that the government has cut corporate taxes. He pockets the windfall.
There is some business logic behind this: if the windfall is temporary, he doesn't want to raise salaries. That would be difficult to undo if the tax rates go back up. And whether this is the logic that actually motivates his decision hardly matters. Who can know what is in his heart? Even he doesn't. This helps him sleep at night. When he harms others his hand has been forced. When he helps other it proves his essential goodness. Fundamental attribution error FTW!
True, but manyservices that Americans get from government comes from state and local government: schools, fire/police, etc. The feds dominate the national new coverage, but local government generally has a much larger affect on your day to day life.
I've heard this trope before, but it doesn't seem true to me. The federal government's day-to-day services include universities (through student loans and grant funding), travel (domestic and international), the quality of food we eat, healthcare regulation, and nearly everything to do with employment.
The local governments seem to focus mostly on K-12 schools, and police/fire; plus some one-off errands like the DMV and liquor laws.
The amount of federal taxes I pay is a life-changing amount if I were to get it back in a single check every year, whereas the state/city taxes of sales+property+stateincome is maybe a quarter as much.
In fact, it's the citizens responsibility to return the dollars via taxation... One way to interpret government debt is that money is a claim to the entire economy of the country and thus money does not create real wealth, it just makes real wealth liquid.
Also, "federal" here does not include not include payroll taxes, which are, nonetheless, considered "federal taxes" in any colloquial conception of the term.
Of course, in addition to the lying by omission, the true irony here is that the "lack" of "federal" taxes paid by the masses is more so a symptom of a deeply inequitable economic system than the counterbalancing endorsement of the status quo the OP likely envisions it to be.
Your second paragraph and last sentences of the first paragraph are perfectly on point. If I wasn’t so worried I was saying something wrong, I would have seen this an hour ago and been able to just say what you wrote. As this is the actual crux of the matter.
I totally agree, but people pull this same move when comparing our tax rates to European countries. People frame their arguments in a light most beneficial to their points they are trying to make.
I think you have it backwards. The extremely rich that might make millions or even billions a year but pay $0 income taxes love to play that game and muddy the water by saying they paid taxes…everyone in these contexts is talking about federal income taxes, not sales tax or property taxes.
How about turn your question around and ask why the top CEOs (especially in tech) pay $0 federal income taxes claim they did pay taxes when they are referencing having paid sales tax, as if not paying sales tax is even a real issue, is in good faith.
I don’t think it’s backwards. I think it’s just that the extremely wealthy and other sympathizers love to play the game any way they can. In certain situations, yes they love to say what you said. In other circumstances, they love to only point out how little so many others pay, if at all.
This points to the larger problem of inequality and how the water is beyond muddy now.
There is no way to do that as a CEO. At best your stock holdings can rise, but your compensation will be taxed. The places where you can earn significant untaxed income are via real estate.
Although you're totally correct I think you're underselling the complexity of the situation.
On paper, the super rich (and even just merely "very" rich) can even show negative incomes [1] because they can a take very low interest-rate loan (which is in a way kind of tax, but paid to the bank) backed by their assets to pay expenses thus they can show no income and no realized capital gains.
But, if you think about it, the practice is not all that different than taking out a home equity line on a house, for example.
So whomever writes that law better be really careful or else the only ones who are going to get caught in that net are the middle class.
[1] They would never actually do that because one needs to harvest that loss. They want to show $0 so they would sell something the balance the negative income out.
It might come as a surprise to you but the CEOs that don’t pay income taxes I’m referencing nevertheless receive compensation packages that put them in the 1% of the 1%.
They are tax strategies that aren’t available to the rest of us, otherwise everyone would have a s-Corp/LLC pay themselves $0 salary and take everything they make as a distribution of profit to avoid payroll taxes/Medicare/SS on income, when the little guy does that it’s called tax fraud.
Shouldn't taxes be thought of as a contribution to some form of spending rather than a purely punitive measure? Why is it not important that 61% of people do not contribute anything to the spending done by the federal government, even if they do contribute to other spending?
Many states receive more federal funds than they contribute in taxes, so according to this mode of argument the population of those states do even worse than contribute nothing.
This is what I said I believe. Are you doubling down on what I said? Like a sibling comment said. The fact that we are confused shows how both the original stat and the technically correct but largely incorrect 43% pay no payroll tax either, are not good statistics. They muddy the water
Per parent comment, those people do contribute to federal spending through payroll and other taxes, even if income taxes make up the largest proportion of revenues.
The fact that you took it that way is evidence of how the original comment is misleading to many people.
I’m not sure how the person took it. I agree the fact that it is taken in some way and I’m not sure which way, is indicative of the misleading quality of the original comment and the comment saying 43% pay no payroll tax (which is only true during the two stimulus years)
61% of people not paying income tax can mean a lot of things. For example, a lot of them don't have to pay income taxes. Children and the unemployed don't pay it.
Federal income taxes are the money that funds the federal government. The military, congress, FBI, courts, EPA, etc. Payroll taxes go to entitlement programs, so they are more similar to paying insurance premiums than actually funding the activities of the government.
The funniest part is that a good chunk of the people who pass along this link in grievance are probably in the group that technically pays no income tax, and don't even realize it.
I don't really see how it misleads the argument in a way that would be considered bad faith. But I do agree focusing on the $0 number does seem kind of arbitrary. A better metric might be percentage of the total tax burden paid by the bottom 50% of the income distribution. Maybe that is 0% if you look purely at federal income tax, and maybe it rises to something like 5% if you include all the other taxes you mention. But I don't think it changes the picture significantly.
I've not looked for a new edition of the report but the CBO has put out reports that calculates net tax rates and more than half of the country are not federal net tax payers (this includes all federal taxes.) And more than 40% of them are so much not net payers that it offsets their entire non-federal tax burden. Ultimately a very large portion of Americans don't pay for any of government and government spending and services.
They do pay, they just get more back out. In a country without any redistribution of wealth and a perfectly efficient government everyone would be a net zero contributor to the government.
In practice most countries have a few hubs where most of the wealth is created (typically coastal cities), and the taxes collected there fund the rest in the form of redistribution of wealth.
Nearly everyone in the US lives in a state with a sales tax (only five do not have a state-level sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.) And, of course, nearly everyone buys something regularly, whether food or clothing or other necessities of life.
It's 100% absurd and untrue to say "a very large portion of Americans don't pay for any of government" when most of us pay something every time we get a box of crackers or put gas in our tanks.
And if you're going to follow up and clarify with a much narrower way that your statement could be taken to be true, then I'd like to know why you opened with "a very large portion of Americans don't pay for any of government" instead of that much more specific -- and much less "the poors are getting a free ride" -- statement.
You need to understand that I'm talking about net taxes. Referencing [0], the bottom 20% of households have a median market income of $15,800. They receive $9,600 in transfers and services. Their pre-tax income is $25,400 and they pay $800 in taxes. States and municipal taxes vary, but even high sales tax states and counties have rates of 15% or less. Let's call it 20% just to be extra generous in the discussion. Take their $24,500 in after tax dollars and spend every bit of it and pay 20% on all transactions. These households have paid $4,900 in non-federal taxes. So their net contribution across all levels of government is $4,900 - $9,600 = $-4,700. On a net basis, they don't pay for any part of the operations of the country at any level because the federal transfers pay for all of their non-federal tax burden.
If you look at the second quintile and do the same math, you also get a negative result. Only at the middle quintile does it even become possible for them to spend so much locally that their local taxes offset the amount in transfers and services.
I stand by my statement that a very large portion of Americans don't pay for any government. Assuming you consider ~40% of Americans to be a very large portion. I didn't say a majority, just a very large portion. Though it is possible that a majority of households don't pay for any government, depending on the specifics of their local tax rates and spending habits. If the middle quintile doesn't spend ALL their money at a local average tax rate of 12.8%, then they don't contribute either.
Because almost everyone who purchases anything pays 'sales tax' and almost all homeowners pay 'property tax,' but the problem we care about is income/capital gains tax evasion.
If that’s the problem that is cared about. Are you saying going after the lower socioeconomic class of America is how to get back those evaded taxes?
The narrative in general for the statistic is about lower socioeconomic people. If this was a good faith caring about tax evasion. Why would the focus be on the people with the least income and wealth?
I don’t think it would be if that was really the problem being cared about.
And yes the sales tax is part of the point. To give nuance to such a simple statistic.
Of course not sales tax. However for the rest, yes people would. People are quickly reading the stat. They aren’t thinking deeply or in a nuanced fashion. They aren’t on a forum like this. They are going about their day.
You agree not everyone knows what payroll taxes specifically go toward or that there’s even a separation of federal income taxes and payroll taxes as distinct things, right?
The fault in your logic here is that in your metaphor joe ate the same as everyone else at the restaurant.
The benefits of society as a whole are not equally shared. The wealthiest in society benefit the most from a functioning and stable federal bureaucracy.
If you’re going to be that pedantic about it, you also never stated that joe ate anything at all, maybe joe paid for apps and just sat there while everyone else ate.
At this point I’m not sure what your point is if its truly your assertion that none of my assumptions were valid. (My assumptions being that we are talking about who assumes responsibility for paying for the benefits of society/governance)
> we are talking about who assumes responsibility for paying for the benefits of society/governance
This has essentially already been decided. The topic is tax avoidance, which I compared to skipping out on a bill that ought to be paid.
It's a pretty standard free rider problem. It doesn't change the problem to point out that the free rider benefits from the ride (which, of course they do) or that they benefit more from it than others, or that they paid unrelated bills.
You’re making a pretty strong assumption that these statistics are a result of tax avoidance. I find it extremely implausible that majority of people who don’t pay income tax are doing so as a result of complex financial schemes. Taking the standard deduction or simply claiming straightforward deductions like the mortgages interest deduction is not tax avoidance when done in the spirit of the law, which, anecdotally, is the case for most middle to low income filers.
I’d need to see some proof before assuming the statistic is a matter of avoidance rather than of explicit tax policy. If you’re claiming people who are in alignment with official tax government policy (again in the spirit not just the letter of the law) are free riders, then we are back to who should assume the responsibility for paying. As stated in my previous post.
> If you’re claiming people who are in alignment with official tax government policy (again in the spirit not just the letter of the law) are free riders, then we are back to who should assume the responsibility for paying. As stated in my previous post.
Sure, I agree with this assessment up to first order. But this is a bit slippery because of second order effects where you can pay to have a favorable tax code created (or at least pay to substantially increase the odds of such a policy being created).
> Taking the standard deduction or simply claiming straightforward deductions like the mortgages interest deduction is not tax avoidance when done in the spirit of the law, which, anecdotally, is the case for most middle to low income filers.
I agree with this.
> I find it extremely implausible that majority of people who don’t pay income tax are doing so as a result of complex financial schemes.
For the short-term Covid-related spike of people not paying due to unemployment and temporary tax credits, sure I agree. In general case, though, the schemes don't have to be very complex and you can just pay people to set them up for you.
Also, the number or percentage of people who don't pay income tax is an indicator of how easy tax avoidance has gotten. That's why that number is quoted. But since the distribution of wealth is so skewed, what really matters in the free rider context is the amount of money not paid into the system.
And for this I don't think it's at all implausible (and is in fact consistent with what we know) to say that the wealthiest Americans pay extremely low income tax rates because of tax avoidance. (Here I am including the creation of favorable tax policy as tax avoidance if it's contrary to the spirit of the US's policy of progressive income tax.)
I guess what’s confusing for me is that the “63% of people don’t pay income taxes” line is usually trotted out to say that the rich are the only ones who pay taxes and everyone is just a welfare queen or something. But it sounds like you are trying to say that it shows that tax avoidance is a real problem and that this a primarily a symptom of the rich being able to hire tax evasion specialists.
If that’s the case then there’s no disagreement from me.
Ah okay, that makes sense then. Sorry about my confusion.
I don't know the motives of the original poster. Since the article was about how the top 10% own ~ 90% of the stock, I assumed the relevance of the income tax figure was that it was related to its impact on wealth inequality.
Your profile is blank. If you’re up for it. Look at mine and send me an email. Every other comment I saw where I knew the comment was not logically sound but couldn’t quite word it right. You were there already having written a great response.
Thank you for your comment! I’m going to consider reaching out, but I also like keeping my account pseudonymous so I’ll have to figure some things out.
I haven’t updated my HN in forever. It is updated now.
If you ever reach out as someone who discovered the community I co-founded or even just try it out. I nor any one else would ever know you are this current handle. Since there’s a few inquires a week and they range a lot.
Do you pay sales tax on purchases? SALT deductions also reduced those paying federal taxes paid when they were still around. Agreed that people misunderstand it quite easily.
Because most people are smart enough to understand that they mean federal income tax. Especially when comparing the entire country, or talking about federal tax policy.
At the Federal level, it is more useful to talk about net taxes of all types. That is, taxes of all types paid to the Federal government (income, excise, payroll/social, etc) after subtracting all transfers and distributions to the taxpayer. This is a more accurate accounting of the situation. It paints a slightly different picture, but not that different.
It turns out that only about 20% of taxpayers send more money to the government than they receive in aggregate across all forms of taxation and transfers. Another 20% of taxpayers roughly pay their own way, providing about as much tax revenue as they receive in transfers. 60% of taxpayers receive more in transfer payments and other distributions than they pay in taxes (not that surprising with things like Social Security).
tl;dr: across all Federal taxes and transfer payments taken as net, 20% of taxpayers are paying taxes that are transferred to 60% of taxpayers.
Individual States have diverse taxation structures, so the net taxpayer statistics likely vary widely.
Several states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming) don't pay any state tax. I'm sure you could make a statement like "85% of US residents don't pay state tax" that would be true but also be incredibly misleading.
Just to clarify (I believe this is what you were hinting at), they dont pay any state income tax. If you look at sales/property taxes for those states you can see some of them make up for the lack of income tax.
That's even worse. It presents even more clearly that the United States has been captured by the upper class, who pay all the bills but also receive all the proceeds (aside from small supports to keep the lower and middle classes working and productive).
This isn't much different than Rome, which of course the US is modeled on.
The only solution is a wealth tax for the next 10 years which dovetails into more sensible taxation on capital gains to prevent this from happening again.
The thing is that most CEOs of Fortune 500 companies aren't even in the 1%, which requires $11.1MM in assets:
$12.7MM/year taxed at 30% (remember, these are workers) means $9MM/year. Presuming they spend half of that it would take 3 years to get to the 1% threshold ... many CEOs don't make it 3 years.
Basically, Fortune 500s are probably minting about 100-200 1 percenters a year. A drop in the bucket compared to inherited and capital gains wealth.
> Here's an academic article on how ancient Rome influenced the writing of the US Constitution
Influenced. Not modeled on. Every republic since Cæsar has been influenced by Rome, including but not limited to its discussion on the relative benefits of monarchy, oligarchy and democracy.
> What Republic has had the most influence on the USA?
Not a republic, not technically, but the English Parliament, no doubt. Bicameralism, impeachment, an executive cabinet--these did not exist in the Roman Republic.
Of course, English democratic tradition was influenced by Rome's. As was America's. But it's a stretch to say the U.S. was "modeled" on the Roman Republic. It was a new system of government. (If one were to claim it was modeled on anything, it would have to be the English government.)
From what I remember (I did a masters in history about a decade ago), Eran Shalev's _Rome Reborn on Western Shores_ was the main book on the subject (edit: the subject being Rome / the classics and early American political culture generally, not specifically the US Constitution).
That said, there was some debate over the influence of Rome on early American political debates, with others citing either "classical republicanism" or the pre-English Civil War debates on the English constitution as more important influences (for example, JGA Pocock or Gordon Wood).
> Lower classes spend 100% of their discretionary money' on assets
Assuming you mean non-discretionary expenses. If so, that describes a third of Americans, down from half in 2002 [1]. A strong majority of Americans (a) get more money from the government than they put in, (b) own assets or (c) route discretionary income to consumption over asset accumulation.
We have an inequality problem. But the facts paint a more moderate, and thus addressable, picture than the pundits.
> If so, that describes a third of Americans, down from half in 2002 [1]
Your source is from 2007. I don't have that particular figure; but in 2019, the bottom 50% of the wealth distribution continue to own almost nothing, the top 10% of the wealth distribution own 71% of all assets and the middle 40% own about 28% [1].
> A strong majority of Americans get more money from the government than they put in
This is literally the point of taxes: to redistribute resources.
> (b) own assets
See above, but ownership of assets is distributed incredibly unequally.
> (c) route discretionary income to consumption over asset accumulation
This argument that poor people remain poor because they make bad choices (formally called "culture of poverty") has been heavily criticized. Most economists and sociologists now reject it and have done so for over 30 years.
> poor people remain poor because they make bad choices
Not sure where it was called a bad choice. It's simply a preference for consumption today over asset accumulation. For most people, that's a fine and comfortable way to live.
The problem is, most consumption is not actually flexible - it's semi-fixed cost (i.e. shelter, food, transportation). And those don't vary enough for asset accumulation to be possible at the lower end (especially when you include externality cost from things like eating cheap food).
The difference between earning $100K and $500K for most developers, for example, is [most] of that extra income going into investment assets; that's because the first $100K covers most of the fixed costs, and short of luxury purchases, there's not much more you need day-to-day. The gap between earning $30K a year and $100K a year is way bigger in terms of QOL than between $100K a year and $1M a year.
(I'm in between both worlds in a way since I have friends making < 30K a year and > 200K a year and I have two careers, one high income and one relatively low income and have thought about the issues quite a bit)
"Bad choices" from the perspective of wealth accumulation. Regardless of how you want to frame it, the idea that attitudinal differences prevent poor people from accumulating wealth is no longer taken seriously by most who study the field.
There is a lot of people in lower classes who spend money on stuff like netflix thats 100% discretionary. Or buy iphones instead of el cheapo ones. I say this from personally knowing a lot of people who do this. I dont really blame them for it, since its kinda the pervasive expectation, but still a lot of people spend on "wants" instead of longterm assets. Now the funny thing is the income isnt always really discretionary, I known people who bought stuff they didnt really need then got their power cut off cause they couldn't pay the bill. Its a mess.
No one is getting rich by diverting that $13.99/mo Netflix subscription -- that's $168 a year -- into asset purchases.
As a nearby comment said better than I could (thanks whakim! for https://news.ycombinator.com/item?id=28907429 ), the "culture of poverty" idea has been discredited for decades, yet it persists because it's certainly easier to blame individuals than change a system that so severely disfavors them.
No but somebody might get less poor by not having to less stuff on a creditcard then pay high interest on it. Or not making minimum payments then getting a higher interest rate later. Compound interest is a bitch and a small debt can blow up real fast.
Your link just says "most economists and socioligists agree" btw, it didnt source it. Also it said the point of taxes is to redistribute resources which us heavily contested and a lot of ppl disagree, stating that as fact not opinion makes the other stuff it says look less credible because clearly it has an agenda.
So does suggesting that a poor person could join the moneyed elite by foregoing their $13.99/mo Netflix to purchase assets -- if that isn't an agenda, I don't know what is.
Why, by saving that $168 a year, they could easily afford a single share of Alphabet (currently at 2,846.31) in, what, 16 years?
Bruh. I didnt say "join the moneyd elite". It doesnt matter if some ppl have more, only if some dont have enough, this is why I hate the "inequality" talking point, bc its not an inherent problem.
Im saying that some people who dont have enough could be in a better spot with better choices and that some personal finance education might help. Not everybody privileged enough to have parents who can teach them to be financially savvy. So high schools probably should.
The netflix subscription is a distraction. So are the lattes and everything else people keep harping on about for personal consumption.
Salary, salary, salary. If you're making $200K, none of the above even register (saving $200 a year? or even 2K by forgoing a latte every day - who cares? it won't make an iota of difference). If you're making $30K / year, you could do all of the above, forgo every single pleasure in life and you've still got a huge uphill battle.
The idea that saving and investing 2k/year "wouldn't make a difference" is pretty funny, since investing 2k/year gets you ~300-400k (inflation-adjusted!) after 40 years (roughly the length of a typical working career).
But that's not really the point, I think. The idea that (most) people remain poor for reasons _other_ than their choices is difficult to credit. Obviously their choices are only the _proximate_ cause; there may be structural factors causing those choices in the first place, but most people who are poor (as in, do not have assets) are not poor because they are being literally robbed at gunpoint. Imagine two people living in the same neighborhood:
Person A makes $30k/year and saves nothing.
Person B makes $35k/year and saves nothing.
Person B is _making choices_ that are different from Person A - they are spending an additional ~5k/year on _something_. You can come up with all sorts of reasons why those choices are reasonable - I sure as heck understand not spending the bare minimum on life's necessities - this isn't a moral judgment! But those choices are being made and they have fairly predictable long-term consequences. If it's possible to live on 30k/year in some set of circumstances, anyone who then occupies comparable circumstances and earns more than 30k/year has a choice to either live below their means... or to not do that. You don't need to call them "bad choices" for this to be true.
Certainly there is a non-trivial number of people whose starting circumstances were such that they truly had no good options, but that's not most people who could reasonably be described as "poor".
Sure, that is a valid excuse for the bottom quartile of income earners for not saving, but not the middle class. There isn't enough demand in the wealthiest 10% to warrant 15,000 Starbucks locations
No. For example you could have 10 people making the minimum wage and 50,000 people making a salary of $50,000 -> $100,000(1 person for each salary in that range). Mode would say the most common wage is minimum wage.
I don't pay any federal income tax on the first x dollars of income I earn either. This is nothing but a recognition that money has diminishing marginal utility.
The issue is that there are too many people earning less than x.
But do the wealthiest 10% pay 90% of the taxes? Answer: nope. Eventually there's a reckoning for this discrepancy, but that's why we have corporate media to delay that as long as possible.
Because they own 90% of the toys and I think we should be taxed more on our share of the toys as opposed to our annual take of toys or we are eventually heading for a nasty tragic unproductive violent revolution. But thank you for playing. If you can make the singularity happen instead and then end scarcity that'll work too, but good luck with that.
Also if you haven't figured out by now that the investor class has figured out how to shelter almost all of their income from taxation, you haven't been paying attention. Time to make them work for their tax dodging ways again IMO.
I am also aware of previously badly implemented wealth taxes that hit just about everyone because of their very low threshold. So have a high threshold this time, say 10 or 50 million $$$, problem solved.
Maybe I would feel differently if I were one of the lucky few with a bug out bunker/castle/estate in New Zealand or inside a dormant volcano, but alas.
On top of that, forget that social security part stops at ~$120K-ish. I realize that you are supposed to get a lot of it back, but can you guarantee 100% that will be the case to an 18 year old right now. More than that, it doesn’t exactly fit in with the system that a safety net for when you’re 60+ is forced upon people via taxes that stop mid way through the top 5%+ income amt. it is almost farcical
>The wage limit for 2021 is $142,800 and it's increasing to $147,000 in 2022.
While I always enjoyed having that extra ~6.25% in my paycheck after I hit the limit every year, it didn't make any material difference in my spending/saving or quality of life.
I expect that's the case for most (if not all) folks who exceed that limit.
And since removing those limits would keep the US social security and medicare chugging along nicely for the next 50 years or so, while not doing so will require cuts in benefits within a decade or so.
While it's not a certainty, it's more likely that we'll come up with better ways to fund healthcare in 50 years rather than in ten.
As such, it makes sense to remove those wage limits on FICA[0] payroll taxes.
Social security has never made sense to me. Not only do wealthy people get to collect social security, but they actually get paid more than less wealthy people, by design. All the money is going to the people who don't need it. Why would the left support something so unequal, and why would the right support a forced savings plan with such bad ROI?
It seems so wasteful. Its a terrible deal for everyone involved, really. Those who made a lot of money and had to pay a lot into SS made terrible returns and would have been better off investing the money. Those who only made a little, and only paid in a little, do not get paid enough to live off of anyway and would have been better off seeing that money in their paycheck.
The only people who benefited from SS were the people retiring soon after is was implemented. Everyone else is worse off, but nobody wants to get rid of it because then they won't get to collect.
None of these are federal taxes though. From that set, they likely paid a lot of payroll tax, which is a fancy way of saying "income tax paid to support social security & medicare" that is kept distinct from "federal income tax" when these sorts of statistics are trotted out.
> Related: 61% of Americans paid no federal income taxes in 2020
It means their income is very low: OP is just pointing out how US society is very very polarized between a small group rich owners (10% that own almost all the stocks) and and a big group of poor people (60% of the population).
Governments should be forced to choose between collecting income taxes _or_ taxing everyone through the general monetary inflation (a.k.a. money printing). They currently practice both - the income tax taxes the non-rich, and the inflation also only taxes the non-rich, because the freshly-printed money goes to the rich.
One of the reasons central banks and monetary policy have taken on such a strong role over since the 2008 financial crisis is an unwillingness to have honest discussions about taxation. If we want "nice things" however you define them, it's easier to outsource the details to an amorphous central bank than actually discuss a just and equitable tax regime that can support those things.
The central bank doesn't really do "inequality" in the sense that getting rid of the central bank will get rid of the inequality. It can only amplify or maintain a trend. The fact that earning money from stocks is profitable than earning money from work is something that can be easily explained by the tax system.
I agree with you that central banks don't have the tools to solve inequality in the long run (as you point out, the tax system and spending does). I'm simply noting that we've collectively invested central banks with magical powers because of our unwillingness to actually discuss taxation.
There's a $10k deduction for state taxes. If the state tax rate is greater than the federal rate, then they won't pay federal income tax. Also, federal income tax doesn't include payroll taxes. Indeed, the last paragraph mentions this:
> Federal income taxes do not include payroll taxes. The Tax Policy Center estimates that only 20% of households paid neither federal income taxes nor payroll taxes. And “nearly everyone” paid some other form of taxes, including state and local sales taxes, excise taxes, property taxes and state income taxes, according to the report.
Nice cherry-picked, but meaningless, statistic you've got there.
Also related (and not spun in a way to make it seem like 61% of Americans aren't paying their fair share):
From 1975 to 2018, the difference between the aggregate taxable income for those below the 90th percentile and the equitable growth counterfactual totals $47 trillion.
It's related in that it morally licenses the privileged to be OK with wealth inequality because, see, the masses are actually being supported by the magnanimous benevolence of their betters.
I just filed my taxes on Friday, the last date of the extension. When you change the tax code 3 times in one year, after overhauling it a few years earlier, it can complicate the ability to report.
Also the 2020 tax code changes allowed for 100% deductions against your income for donations to some kinds of non-profits. That plus being able to withdraw from 401ks, plus having large drops in income, means many people would not have anything to pay. You can always spend more than you earn (on certain things) and nullify your taxes that year. You just have to have more than you earn already, whether its savings, credit card debt, or other capital. So it should be obvious thats not an experience most people ever have, if they are barely making ends meet to cover living costs monthly. But its always available.
That's because of the covid downturn, though. A ton of people saw a rapid shortfall in income, but it's was (as the article calls out) transitory. It doesn't reflect what we saw in 2019 or will see this year. Questions about wealth distribution are, by definition, not transitory.
That's true, but (especially when spread by politicians) terribly spun.
Almost half of americans have no federal "income tax" liability. They still pay a ton of federal tax on every paycheck they receive. Their income is absolutely taxed.
That's just not true. It might be taxed at the state or local level, but a lot of people simply don't pay federal income tax (and in fact receive a relatively large refund at the end of the year).
(many people get confused and interpret social security and health insurance withholdings as taxes).
I would probably even go so far as to call insurance a tax as well since I am legally required to pay it. I may have my choice what company administers my policy but they're effectively private arms of the government.
It will definitely reflect what you see this year, and probably a few years to come. It hasn't gone away, international travel is not the same (changing who is available to work due to reduced emigration), supply chain disruptions and reconfigurations continue. The workforce has changed, too, wealth inequality is now on the forefront of many people's minds, remote work is more prevalent than ever, and it has changed how people are engaging with work.
We do not know that COVID impacts are "transitory". It is only by assertion, by people who I would say have all the motivation in the world to claim they are "transitory". At the moment I can't provide any evidence that they are "transitory" beyond the bald assertion. They can just as easily be permanent.
We won't know for at least another five years at a minimum.
The "economy" is not just what is captured in formally taxable income. Large swaths of the economy is composed by absolutely essential reproductive labor that receives no direct monetary compensation. Conversely, the existence monetary income doesn't necessitate that economically meaningful or necessary labor is being performed, just that it is being compensated for in a formal manner.
Then, of course, there's unearned income -- very much so related to the topic of "stock ownership" that started this thread -- which, by definition, is acquired not through any meaningful contribution of labor to the "economy", but instead as a reward for the incidental private claim to profits our economic system happens to allow to people.
With the advent of AI, wealth inequality is probably going to widen. Manual work is getting less and less valuable while ownership of the machines that do the work is getting more and more valuable.
I wonder if the wealth inequality is growing via transfer - aka "The rich get richer and the poor get poorer" - or if everybody is getting richer and the rich just get richer faster?
A good way to look at this might be some measure of the living standard / quality of life.
Over the last 10 years for example - did it go up for everyone? Or did it go up for some and down for some?
"A good way to look at this might be some measure of the living standard / quality of life."
We have a lower percentage of the populace that is poor--but they still live with little or no access to health care, in poor housing with problems (pests, access to clean resources, food supply, rampant violent criminal activity, etc.) and in other conditions such that they may as well be in corrugated metal shanties with dirty water and little/no access to electricity and other "amenities".
The living standard and quality of life for poor americans is marginally better than for poor people in third-world countries. We put a better spin on it and (ab)use statistics to paint a better picture.
"The living standard and quality of life for poor americans is marginally better than for poor people in third-world countries"
I have no experience of third world countries, but if I am destined to be poor, I would rather live in ex-soviet block countries like Czech Republic. They gave half-decent public services, healthcare, etc.
From experience in third world countries I'd say it's quite accurate, being poor in a country with ~3000$ GDP per capita is not that different from being very poor in America.
I don't have good sources handy right now, but from the research I've read, it seems mostly like (on a multi-decade scale) the poorest have gotten moderately richer, the middle classes has stagnated at best, the upper-middle class has gotten moderately richer, and the richest have gotten much much richer.
>> or is everybody getting richer but the rich get richer faster?
There is some truth to this statement. Just a few years ago (20018), the US added a record number of millionaires:
The number of millionaire households in the U.S. jumped by more than 700,000 last year, thanks to surging stock prices and housing values, according to a new report.
The U.S. now has more than 11 million millionaire households, according to Spectrem Group, up more than 6 percent from 2016. The number of new millionaires and the total population of millionaires set records. Spectrem defines millionaire households as those with at least $1 million in investible assets, not including primary residence.
Since the financial crisis, the number of millionaire households has nearly doubled. In 2009, there were just under 6 million millionaire households. It’s grown every year since, and is now well past the precrisis level of 9 million millionaires.
"means of production". Machines is not to be taken literally, I believe.
Whether people get replaced by AI/ML/Algos for middle-management decision-making, or they get replaced by kiosks and hamburger assembly devices at a fast food hut, there will be the owners of the means of production, and there will be the newly unemployed workers.
The fear expressed by the OP (and me) is over the long run, how will we keep the owners of all that capital and production from wringing out the lower 90% to the point where "snow crash" reads like a documentary?
Hard to say how this will play out. When I say "machines", I mean a combination of hardware and software. And these machines will be "machines that build machines". Including new software.
Can you cite an algorithm that today needs to be licensed for use? All the underlying algorothms anyone is going to be using are going to be publicly available. I don't pay a severance to Markov, Poisson, or Bayes.
During the Industrial Revolution the owners of the factories became richer and richer and the workers got poorer and poorer. I seem to remember some quote about the workers "seizing the means of production"... I wonder what that looks like with AI?
In my experience, manual work seems to be getting more and more valuable, at least in the US, and it's because you cannot computerize wiring a house or pouring a concrete foundation or plumbing a bathroom.
Isn't that because normal people are heavily encouraged to put all their money into buying a house? Culturally ("rent is just throwing money away" / "the stock market is a casino"), with financial incentives (mortgage interest deduction, SALT deduction, Fannie/Freddy insured 30 year mortgages), and quality of life (school districting/social services or lack thereof), we get people to put every dollar they can into buying a house. Or more than one (apparently everyone aspires to be an amateur landlord). Consequently, you need to have a lot of money before you've bought enough house to move onto buying stocks.
If renting and investing were more normalized and encouraged, I'd expect a different ratio of real estate : financial asset ownership.
Keep in mind that most people are their wealthiest at retirement age. People near retirement tend to have a lot invested. People under 30 make up 50% of the population - but will not be their wealthiest for another 30 years.
But in 30 years, those same people will also have significant amounts of savings (ideally).
Not at all saying that there are no issues with wealth distribution, or stock-ownership-distribution. But the top 10% aren't necessarily the "elites". They could also just be your parents.
I expected an even more unequal distribution.
Owning stocks is risky, and stock portfolios are mostly bought with money people don't need to live on a day to day basis.
The poor simply can't afford stocks, and I expect the middle class to make different kinds of investment. Like property (buy a house), and low risk saving accounts that may be backed by stocks but the owner of the account is not the owner of the stocks. There may be a small part of gamblers who play the stock market like they are in Vegas, but I expect most stocks to be owned by very rich individuals or institutions, who can mitigate the risks by having lots of stocks, and also have some amount of control on the companies they invested into, rather than a millionth of a vote for small investors. Among the institutions are the ones that provide financial services to the middle class.
No, the interest rates for retail savings accounts are zero (or near as makes no difference), and have been for at least two decades. Basically everybody knows that they are completely useless by now, and that even "regular" people need to move to bonds or stocks in order to see any kind of return.
I switched to interest free accounts simply because I got tired of having to add a few dollars (or less) of interest to reconcile my Quicken accounts at the end of every month.
Such a joke. I remember when an ING money market was paying like some crazy 4 or 5% in the late 90's.
ING gave 5%, but mortgage rates were also 8-9% and car loans even worse. I remember my first car, which I got in December '99, had a 13.1% interest rate, and that was already at the lower end.
Oh yeah, that's a really important point. My first mortgage was 8.5% ... on a $130k 2400sqft house in a metropolitan area that now goes for >800k on zillow.
I'm not sure you need to be very rich, or an institution to diversify. In fact, it's never been easier to own hundreds, or thousands, of stocks as an individual. All you need to do is buy etfs.
Perhaps this is a foolish question, but how do retirement accounts fit into this? I assume many of us have retirement accounts that own parts of mutual funds or ETFs, are those counted, or are the banks that managed those considered the "owner" and we're just getting a share?
They're included, which makes the headline (and article itself) mostly meaningless. Yeah, I have >$1million in the market, but it's almost all via funds in my 401k. I'm not actively voting on any of the companies and I largely don't even know which companies I hold.
It would be more interesting to know what % of the market the top-1% hold.
My point is the 10th percentile household (~$200k income) has more in common with the median (~$70k) income household than they do with the top 1% household (~$530k). Or even the top 0.1%...
Really? I doubt that the median income household goes on international vacations every year, whereas that is a luxury both the 10th and 1th percentile can afford to enjoy. Sure the 10th percentile might have to pick 2 of the 5 luxuries enjoyed by the 1%, but thats more than someone at the median could enjoy.
Things get messier if you include assets, but speaking just to income percentiles...
I was thinking more in terms of ability to generate intragenerational wealth (of the self-sustaining variety).
Rich vs wealthy. Working for income vs living off interest. Etc.
Or the ability to influence politics, corporate policy, or otherwise yield substantial power, which tends to reinforce the income gap.
As a top-5% income earner, I can assure you I don't yield any more political or corporate power than anybody else in the bottom 99.5% or so. And I certainly won't be leaving massive trust funds for my heirs.
I'm not sure if the point of the article was that the top 10% control corporations. I think they were more trying to point out the extreme wealth inequality in this country.
I assume this is through mutual funds and ETF's? I would think it riskier to actually own the stock directly unless this headline is biased by the founders of the key NASDAQ stocks owning 80% of the 89% (by value) by dint of being founders...
It would be more interesting to see the breakdown of what's held in retirement and pension accounts vs. post-tax accounts.
Daily reminder that stock market is not the economy.
During the pandemic, stock market has sky rocketed while production, productivity, life expectancy and quality of life all fell off a cliff. Every measurable metric.
GDP made a V-shaped recovery. So did corporate profits, earnings, and unemployment rate. It is correlated. People are not just buying up stocks for no reason at all.
Why would life expectancy or quality of life have an impact on the stock market? Literally the only thing that matters is future cash flows of public companies.
This is one of those things that is true, kind of, but inaccurate.
Generally, we don't have government moratoriums on eviction when the economy hits new highs, nor do we need massive government spending for things like unemployment benefits.
That is a good point, but I believe that those programs did not add much to the recovery. They helped but not as much as commonly assumed. Rather, look how much profits multinationals generated. I think it had more to do with increased productivity and efficiency. Much of the stimulus was spent on administrative stuff, paying down debts, or saved, as opposed to consumer spending.
I think I see the point you're making, but the stuff that you say that the stimulus money was spent on are the things that result from the US economic inequality: folks tend to save when they _need_ a safety net; folks tend to pay down debts _when they have debts_ (especially those that they didn't feel they could pay down without the stimulus, which are generally larger, such as medical or legal debts); etc.
I own a box of band-aids, way more than enough to patch the cuts and scrapes I'm likely to experience in the near future. If Biden gave me a band-aid, I'd be very likely to hand it to someone else if they needed it, because I know I have my box. On the other hand, if I have no band-aids, and Biden was so generous, I'd probably either save it for my next (inevitable) cut or stick it straight onto one of my open wounds.
Yes, but it was still a crash. But for some reason the usual doomsayers who love to predict market crashes are not satisfied with it. They are still waiting for a repeat of 2008.
This makes a lot more sense when you consider that the vast, vast majority of accumulated wealth over the last 100 years is corporate wealth.
To depoliticize ... I would interpret this statistic as an indication of the correlation between wealth and corporate stock ownership, which is almost tautological. If you own or help run a public company you are probably very rich.
And even in the hypothetical case where more of the "90%" are benefiting from stock ownership than ever, this statistic will always simply highlight the reality that running or owning a business makes you money.
How is it that the article says 100% of _all_ the U.S. stocks are owned by Americans? Aren’t foreigners able to own U.S. stocks? Investopedia says they can.
One example: Chinese stocks oftentimes can't be owned by foreigners. The workaround is to start an offshore company that pegs its share price to the price of the onshore asset. Many Chinese stocks on Robinhood use this model, like Alibaba.
If it was that risky, they wouldn’t have these assets. People have investments because they understand cash alone won’t grow. Someone like Jeff Bezos has most of his wealth in Amazon stock partly because he perceives Amazon stock as better than cash. (Which is a very good analysis. Even a huge crash in stock value would still outperform cash by a huge margin over time.)
If these assets were very risky or likely to cause a portfolio to never grow, the rich would absolutely not be utilizing them as much.
Are they? If you can't afford to own stock, you're probably much more vulnerable to the secondary impacts of a stock market crisis (losing one's job, etc).
Maybe 10% of americans are close to retirement age, and have been saving all their life in something called a 401k, which happens to be stock.
That would be ... not very outragous.
Sure, you can say 89% of stocks is too much and there must be other factors at work. But I refuse to be outraged until we control for the non-outragous factors, and see what remains.
But it takes a bit more effort to combine this number with what the article offers into a coherent point.
If the top 10% has a lot of older workers-and-savers in it, then it's not very outragous.
Your numbers don't answer that very clearly. Are those people who have worked for 40 years? Does it include spouses who may have worked for less time? And how does the median (50th percentile) translate into the 10th percentile, and what's the wealth cutoff for the 10th percentile?
I don’t know what to make of this statistic. Wealth begets wealth so this is not surprising. Stocks are not a limited scarce resource so it’s not like the top are hoarding them. A more interesting stat would be to see if the bottom 90% increased their stock holdings or not. It would be a shame if that reduced for some population bracket.
To me, this simply shows how inequal the american society has become, and how the stock market amplifies it.
You can have an impact on the real economy with stocks. Look at what happened with GameStop. But that impact is done and decided by the wealthiest, who will reap the benefits of it.
But if you live paychecks by paychecks, having no money to put into stocks, you just suffer the consequences of this impact.
> Stocks are not a limited scarce resource so it’s not like the top are hoarding them.
How are stocks not a limited resource? I know companies occasionally issue new stock to rise capital for new business ventures but that doesn’t happen that often no?
Well, let's broaden the scope a bit then. Beyond simply issuing new shares, you can found a new company. This happens a lot, outside the bay, you just don't hear or think about it unless it's a VC backed firm hoping to make it huge. When it's a sole proprietorship, crickets. Perhaps this is fine, but there are different modes of ownership across the country.
It doesn't if you tax capital gains properly. It's more important to speak of relative ownership as that reflects the change in power held by the 90% majority of Americans - it's vanishing before your eyes.
Oh the poor is getting poorer in both ways when they for instance get priced out of the housing market. Wealth equality is a premise for long term prosperity of the majority.
And it's a feedback system, next time they choose the red or blue pimp, their ballot will be worth less due to increase in lobbying money held by the 10-1-0.1% - lobbying money used to purchase tax cuts for the same 10-1-0.1%.
> Stocks are not a limited scarce resource so it’s not like the top are hoarding them.
Securities are by definition limited. Splits and IPOs are the only places stocks are born, and those are carefully regulated.
And... while the language is inflammatory, it seems to me like the top are meeting the definition of "hoarding" them. That's what owning 89% of something means.
I live in a poor neighborhood in a reasonably large city.
I shop locally (even avoiding the more affluent neighborhoods), exclusively if possible, as a matter of voting with my wallet because the businesses in my neighborhood employ mostly local folks.
At large scale, yeah, you're right. But for a small local business, one or two extra regular customers can be a bigger difference (drop in a bucket vs drop in the ocean). Even something like shopping at a local big-box supports the local proletariat more than shopping at Amazon, where the proletariat isn't guaranteed to be local at all (and to be clear: it's more about supporting the proletariat than the capitalists).
The bottom 90% of Americans held about 11% of stocks, and added $1.2 trillion in wealth during the Covid-19 pandemic.
The top 10% saw the value of their stocks gain 43% between January 2020 and June of 2021, according to the Fed. The bottom 90% saw stock wealth rise at a lower rate — 33%.
Part of the phenomenon in the 2nd paragraph might be the way the data is picked, in the same way you might find that a basketball team averages 8 more points per game in wins vs losses.
Really? Most discussions on inequality I witnessed focused on the ultra-rich: Bezos, Musk and so on. I actually think it would make sense to include the upper middle class as well.
Well ok, maybe on twitter. But in elections the middle classes are typically pitted against each other. "Raise taxes for lawyers", "Decrease welfare payments".
The top 10% demographic is made up mostly by people who consider themselves middle class. The 10th percentile income is like $180k/year, or a little more than an entry level FAANG job. The 1% borderline is a little over half a million dollars, and while obviously very comfortable is not a lifestyle something people would consider genuinely "rich".
So, yeah. It's stocks owned by these folks -- people with normal houses and normal cars and normal jobs, but with a ton of disposable income to stuff into Robinhood accounts -- that seem the most unfairly distributed.
The top 1% consider themselves middle-class half the time. That's no reason to pretend like they are - unless you're British and the usage of "middle-class" means rich but without a title.
So 40% of US stocks are owned by foreigners. 30% by pensions funds? And now 89% owned by the top 10% of Americans making 159% ???
I would guess the correct headline is something like "of the shares held directly by private American individuals the brokerage accounts of the top 10% hold 89% of those shares". Which sounds perfectly plausible.
Does the article writer understand this or are they confused as to the meaning? Is this artical and discussion just gibberish all the way down or is it me whose not understanding?
Keep in mind, that this statistic doesn't necessarily mean that the top 10% own a lot of wealth. if the bottom 89% owns a total of 10$ worth of wealth then the top 10% isn't doing any better. take all that wealth and calculate what it would be if it was divided by 300 million people and then divide that number by the number of years it takes to acquire that wealth and you'll find, it's not very much wealth at all.
The part that concerns me the most is the fact that inequality is the result of a global money-printing ponzi scheme. As most people learn what has happened, the level of bitterness and division is going to be intolerable. What we're seeing now is nothing because most people still don't know what has happened. Even 90% of people on HN don't realize what has happened.
Also, now the system will be forced into hyper-drive. Those who have benefited from the scheme so far will benefit even more; the crony system will need to incentivize its proponents into an increasingly deep trance as the fraudulent nature of the scheme becomes increasingly difficult to ignore. Those who have been harmed by the system will be harmed even more. There will be a tiny percentage of the population living a blissful life of ignorance while resentment grows within the majority of the population. The narratives around everything; politics, the economy and society are going to fall apart. We might actually end up with some kind of anarchy.
also, the inaction on climate change is a catalyst as well.
people have been pushed to more extreme political views, because cooperating and sharing the wealth is not in the interest of the wealthy minority.
Isn’t this logically equivalent to “The most successful 10% of athletes have won 90% of olympic gold medals”?
We’re using their wealth (which naturally includes a lot of stock because it can be held in tax-deferred retirement accounts and has the greatest growth expectation historically) to identify the top decile, then we find that they, err, own a lot of stock. How surprising.
You're right, it's similar. It's sort of tautological to say that the 10% wealthiest own more of the wealth. But we're talking specifically about distribution here.
The top 10% could own anywhere between 10% of the wealth, and 100%. If the top 10% own 15% of the wealth, that means everyone's basically in the same boat. If they own 100% - that means 90% of people have nothing, and 10% have everything - sort of like a fiefdom. That doesn't seem great. What's the best for society? Some might think it's when 10% owns 10%, period - as evenly distributed as possible. Maybe - but I don't think I agree. Though it's not likely the 100%/0% hard line.
Anyway - this article is saying that we're getting closer to the 100%/0% direction than ever before. At least in terms of stock ownership. Whether this is a good or bad thing is up to your own interpretation.
If there was anything interesting with the comparison, it would be to look at the difference between total wealth inequality and stock ownership inequality and see if there was anything that is unexpected. We may expect A group owning 90% of wealth to own 90% of stocks. If this isn't the case, is this surprising? (I don't remember the wealth inequality statistics, so I'm just theorizing here).
The Swiss National Bank also holds a very large amount of US stocks [1]
"The Swiss National Bank owned U.S. equities worth a record $162 billion as of end June, reaping the benefits of a rallying market.
Data published on Friday showed the SNB held shares in 2,642 companies, including a $6 billion stake in Amazon Inc. and one worth $1.1 billion in Exxon Mobil Corp."
Pretty sure the percentages are not of "U.S. stocks" per se, but rather of stocks owned by U.S. households (the percentages by income add to 100% and obviously foreigners own some U.S. stocks).
If the wealthiest 10% of Americans own 89% of all U.S. stocks, that means "everyone else" owns the other 11%. That may include other Americans, but what about foreign investors (sovereigns, institutions, etc.)? Surely they own a bunch of U.S. equity? Perhaps the article uses the denominator not of "all U.S. equity" but "all U.S. equity owned by American individuals and institutions".
Hmm this doesn't entirely make sense. What kind(s) of ownership are they talking about? Direct stock ownership? Mutual Funds? Index Funds?
Something to think about: the Fed has been POURING money into the stock market, to keep "the economy" stable. They don't have to use money in that way; they could also use money to actually help people (theoretically anyway)
>They don't have to use money in that way; they could also use money to actually help people (theoretically anyway)
No, that would require fiscal policy. The president would have to come up with a way to use the money to create jobs or at least invest into something with a future benefit. cough infrastructure bill cough
And that's an inflated number because of 401k accounts, which were largely a PR exercise to convince the population that market swings affect Americans in general rather than just the wealthy (although mainly a pretense to cut national labor costs by eliminating pensions.)
How does this metric compare to other countries? Certain European countries I am familiar with don't have a strong emphasis on stocks as a wealth builder (as wrong as I personally think that is), and instead overindex on real estate.
Who says inflation hurts the rich more than the poor? I've been seeing that narrative lately. But the rich have access to hedges, and the poor have politicians who raise the minimum wage only when they have to.
Inflation encourages people to spend their money on consumption and investments. At 0% inflation the rich just get to keep their money in bank accounts and do nothing with it which helps nobody. Consumer spending and investment creates the need for labor which creates jobs which creates incomes which can then be spent again.
The poor already spend most of their money so they barely lose out but they benefit from the employment opportunities that inflation gives them. Inflation raises the price level for basically everything including wages. This means you need to keep changing jobs frequently but this is mostly because nobody is joining unions to bargain collectively.
If the rich buy stocks and it turns out those companies did a good job at providing goods and services then you didn't lose out at all as a poor person while the rich merely did their job of supporting companies with their money. This is because inflation increases the value of future income streams and good companies tend to have reliable future income streams.
If the companies are overvalued and their valuation grew much faster than inflation that just means that there will be a correction and the value of the stock will vanish with that correction. I don't see anything unfair about this.
The real problem is that extracting economic rents distorts economies and drives inequality because the other party cannot refuse. Real estate is a common example. People speculate on the value of the land and sometimes even keep it vacant because they know they get to rip off a future buyer because that buyer needs to live where the jobs are.
So one thing to keep in mind, the pressure to spend due to an inflationary monetary system influences people's behavior; perhaps the poor spend all their money because of inflation. When rent goes up every year and consumer prices increase, of course people who are just making ends meet never get to save.
Perhaps in a disinflationary environment more poor people would save money and there would be more upward mobility. Of course, rich people would use hedges to make more money rather than just hedge against inflation, so that investment wouldn't go away. People that hoard currency lose out in all but a deflationary environment.
Either way the idea that a class of people who take their dollars and put them in deflationary or disinflationary hedge investments lose while a class who keep cash in their mattress (if they're lucky enough to have savings after prices rise) win in an inflationary environment is missing a lot of economic behavior and dynamic and IMO is oversimplified and wrong.
Yes, this is true, but I think the effect is overstated, and an environment where people could save money without it devaluing would have more of a positive effect on those people because they wouldn't need so much debt in the first place. That's my view on this anyway.
I've found pretty much every article about wealth inequity useless because they never say anything about what the right level of wealth inequity should be. Without that I have no idea if what the article is reporting is something I should be concerned about, and if it is whether I should be concerned because it is too high or because it is too low.
In any distribution other than one where everyone has equal wealth there must be inequity--that is mathematically unescapable. If there are at least two people who do not have the same wealth, then necessarily the top N% will control M% of the wealth for all M, N with M > N.
Current levels are basically a fact, subject to gaming like all statistics. But the "right" or ideal level of inequity is a matter of opinion. Personally I think there should be enough inequity to give people an incentive to work harder and take some risks -- but in my experience that doesn't take much at all. If you let the top people have 2X the bottom people, there would still be LOTS of people fighting to be at the top. The other argument for inequity is "fairness", perhaps the people at the top have earned the right to have 10X, 1000X, 1000000X what everyone else has. That's up to you to decide what you think is fair.
Because they don't discuss the methodology used to arrive at these numbers nor do they link to any sort of full report explaining these stats. For all we know, these numbers are complete bunk.
Furthermore, these sorts of wealth-inequality stats are typically used by disingenuous media outlets as a propaganda tool to support the political goals of their ownership. Reading such articles with a large dose of skepticism is a necessity.
Love me some top 0.1% propaganda to pin the lower classes against each other. The top 10% have more in common with the median individual than this article makes out. It’s the top 0.1% that are out of control and need to be reigned in.
Yes, CNBC obviously seized on the number 10% to make it sound like a small number of people, but the top 10% of Americans includes over 25 million people.
If we can't address inequality without inflaming envy then we're better off not addressing it at all. We'll just end up creating more tyranny in the pursuit of ending tyranny.
my comment was sarcasm/rhetorical, 11% cant tank 89% of a market.
however, to answer your question, i would guess the majority of US based HN readers are in that 100k+ bracket. the audience here skews very high income i would guess.
It compares a recent Stanford grad from a wealthy family to a 55-year-old who was scraping through the first 35-40 years of life, but now makes $190k/yr as a successful tradesman during boom time. The former will count as "poor" and the latter will count as "top 10%".
In other words, no, it's not comparing Americans of different classes. It's comparing Americans at different stages of life. Or just the ebb and flow of income over and individual's life (selling a house even in a modest area can easily put you into the top 10% for a year).
You need to follow individuals over their lives to get a better picture of who is struggling and who is thriving.