Archive for the ‘wealth’ Tag

Parade Magazine and ts What Do People Earn: What People Think?

Parade Magazine every once in awhile shows all the readers of its Sunday magazine how much a variety of Americans earn in the US. You can deduce from that information, which Americans have the best chance of having the wealth in the country: owning stocks and bonds, real estate, etc.

But, surprise, most people in the U.S. don’t know how much wealth others have.  This chart is from a paper called “Building a Better America One Wealth Quintile at a Time” by Dan Ariely and Michael I. Norton. The first line shows the actual distribution of wealth in the US. The tops 20% hold over 85% of the land, assets, etc. Yet, folks perceptions are way off. Find your estimated income and then look at the chart to see how close your income group comes to knowing how the money is spread in the US.

Best of all, look at how the various income groups and voters think that the income ought to be distributed in the US. It is so different from the way it is, that the disconnect is not funny but pathetic.

post_full_1285695177Realvs.ImaginedWealthDistributionintheU

Tax The Wealthy

Let’s not forget that the “Fiscal Cliff” is around the corner. Obama has  toured the country and talked about the need to tax the wealthy. A former cabinet member, Larry Summers, completed an editorial that pointed out where the real tax gains can be made to increase the fairness of the US Tax Code and bring in more revenue for the federal government.

My one question after reading the piece: where were these ideas when he was part of the Obama Administration?

No, it is not the mortgage deduction. This helps homeowners in all classes of the country. It could be modified to limit the amount of money that one could write off so that the public is not financing some wealthy individuals McMansion. But, ultimately, we need to keep that deduction.

The changes need to come on capital gains tax rates. We’ve all heard that the wealthy don’t pay a fair percentage of their income but that is because so much of it is taxed at a much lower rate than earned income. So, first raise the tax rates on this income. Second, as Summers notes, get rid of the laws that have been added over the years that shield a lot of the income of the wealthy from being counted as money that they earn.

Summers writes: the numerous exclusions from the definition of adjusted gross income that enable the accumulation of great wealth with the payment of little or no taxes. The issue of the special capital gains treatment of carried interest — performance fee income for investment managers — is only the tip of a very large iceberg. Far too many provisions favor a small minority of very fortunate taxpayers. They effectively permit the accumulation of wealth to go substantially underreported on income and estate tax returns, which forces the federal government to consider excessive increases in tax rates if it is to reach any given revenue target.

There are many more inequitable items in the current tax laws that cry out for reform. Here is Summers again:

Current valuation practices built into the tax code make it possible for investment partners to end up with $50 million or more in tax-free individual retirement accounts when most Americans are constrained by a $5,000 annual contribution limit.

Our estate tax system is broken. Assets passed to relatives or other personal relations are often badly misvalued relative to what they cost on an open market. The total wealth of American households is estimated at more than $60 trillion. It is heavily concentrated in very few hands. An estimated $1.2 trillion, or 2 percent, is passed down each year, mostly from the very rich. Yet estate and gift taxes raise less than $12 billion, or 1 percent of this figure, annually.

But real estate investment operators, who sell properties whose value is measured in the hundreds of millions — if not billions — of dollars, are able to take tax deductions for “depreciation” on their properties. They are then able to sell these properties at an appreciated price while avoiding capital gains tax through what is known as a “like kind exchange.” This is in fact a sale.

Middle Classless in US: It’s the New Economy

As the next election cycle comes up, we’re beginning to hear more about the declining middle class. The stats are in and its irrefutable, the US has lost millions from the middling income levels. People continued their middle-class lifestyle through going into credit card debt during the 2000s and now they don’t have that.

What they need is a decent paying job. What the country needs is for them to have a decent paying job so that they can live well and spend. Without it, our vaunted 70% consumption economy will falter. When people in power make this clear, the media organs sometimes undercut their message with purpposeful deletions of their words, like Jimmy Hoffa’s call for Jobs being deleted by Fox News.

one in three Americans who grew up middle-class has slipped down the income ladder as an adult, according to a new report by the Pew Charitable Trusts

Downward mobility is most common among middle-class people who are divorced or separated from their spouses, did not attend college, scored poorly on standardized tests, or used hard drugs, the report says.

 

“A middle-class upbringing does not guarantee the same status over the course of a lifetime,” the report says.

The study focused on people who were middle-class teenagers in 1979 and who were between 39 and 44 years old in 2004 and 2006. It defines people as middle-class if they fall between the 30th and 70th percentiles in income distribution, which for a family of four is between $32,900 and $64,000 a year in 2010 dollars.

People were deemed downwardly mobile if they fell below the 30th percentile in income, if their income rank was 20 or more percentiles below their parents’ rank, or if they earn at least 20 percent less than their parents. The findings do not cover the difficult times that the nation has endured since 2007.

Pew researchers said the study’s structure did not permit an analysis of whether upward mobility has become more difficult through the years. Nonetheless, some economists point to growing income inequality and widely stagnating wages as evidence that the American Dream is slipping out of reach for many people.

The report found that being married helps people avoid the worst economic outcomes. Women who are divorced, widowed or separated are much more likely to fall down the economic ladder than their married counterparts. For men, the differences are not as dramatic, although married men are more likely than single men to retain their middle- class status as adults.

Education, particularly going to college, is another crucial factor in people’s economic stability, the report says.

Women who graduated from high school are more likely to be downwardly mobile than their counterparts who are college graduates. The same dynamic exists among men, the study found.

Overall, African American men have a particularly hard time clinging to middle-class status. Thirty-eight percent of black men who grew up middle-class are downwardly mobile, nearly double the rate of white men, the report says. Hispanic men are slightly more likely than white males to fall down the economic ladder, but the difference was not statistically significant.

Among African Americans and Hispanics, men are more likely to slip than women, although the reverse is true among whites.

The racial gap in mobility has perplexed researchers at Pew since a 2007 reportthat said nearly half of African Americans born to middle-income parents in the late 1960s plunged into poverty or near-poverty as adults. That report underscored the feeble grip many African Americans had on middle-class life, prompting researchers to probe deeper, said Erin Currier, project manager of Pew’s Economic Mobility Project.

The new report called the performance of blacks on a key standardized test a factor that accounts for virtually the entire mobility gap separating the races. Black males scored much lower than white males on the Armed Forces Qualification Test, which measures reading comprehension, vocabulary and math ability.

“Taking into account differences in AFQT scores between middle-class white and black men reduces the gap until it is statistically indistinguishable from zero,” the report said.

The findings in the report are drawn from the National Longitudinal Survey of Youth, a group of 12,000 interviews that researchers have followed since 1979.
 
A big problem is that jobs are fewer in muber and require particular skill sets as part of the New Economy: which is really finance and poor paying service jobs as Harold Myerson points out below:

Today, the economy that arose on manufacturing’s ashes has turned to ashes itself. The Wall Street-Wal-Mart economy of the past several decades off-shored millions of factory jobs, which it offset by creating low-paying jobs in the service and retail sectors; extending credit to consumers so they could keep consuming despite their stagnating incomes; and fueling, until it collapsed, a boom in construction.

We are only now beginning to understand the toll this economy has taken on America’s workers — and on our working men in particular. A stunning study from Michael Greenstone and Adam Looney of the Hamilton Project, published in the Milken Institute Review, reveals that the median earnings of men ages 25 to 64 declined 28 percent between 1969 and 2009. Within this age group, the median earnings of men who completed high school but didn’t go on to college fell 47 percent, while the median earnings of male college graduates also declined, if only 12 percent.

Part of this decline stems from the shrinking share of working-age men with full-time jobs, which fell from 83 to 66 percent between 1960 and 2009. The other part stems from the fall in inflation-adjusted median yearly earnings of working-age men who have full-time jobs, which have shrunk by about $5,000 since the mid-’70s. Combined, write Greenstone and Looney, these two declines explain why the earnings of American men “haven’t been this low since Ike was president and Marshal Dillon was keeping the peace in Dodge City.”

Anyone seeking to understand the pessimism, frustration and rage of working-class men needs to begin here, with Greenstone and Looney’s two-by-four-to-the-head tale of decline. White working-class men in particular have become a disproportionately receptive audience for those who scapegoat immigrants and minorities for the damage that has actually been caused by economic and political elites blissfully blind to the devastation ushered in by their vaunted new economy.

Since that new economy blew up three years ago, many of those elites have been disabused of the financial fantasies that ordinary Americans long ago ceased to entertain. The fact that Greenstone and Looney’s study emerged from the Hamilton Project — a pillar of new-economy thinking, founded by Clinton Treasury secretary Robert Rubin — is evidence of a paradigm shift in economic vision. From centrist Democratic groups such as the Progressive Policy Institute and Third Way, to economists such as Hoover Institution Nobel laureate Michael Spence, to chief executives and former chief executives such as Dow Chemical’s Andrew Liveris and Intel’s Andy Grove, the new watchword for America’s future — however challenging it may be to get there — is manufacturing.

Post-industrial America turned out to be a bust. The time for neo-industrial America has arrived.

 

 

 

 

 

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