Your Lying Eyes

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10 January 2014

Attacking Inequality

Bill de Blasio's clueless quest to reduce inequality in NYC is of course laughable, unless his secret agenda is to secretly drive out all its wealthy denizens, which I seriously doubt. And Obama's harping on it is downright annoying, as he never proposes anything to actually reduce it. Both men seem to sincerely think that "universal Pre-K" is the answer, and that's rather comical.

If we as a nation are truly interested in reducing inequality in America, there are some very immediate steps we could take to put a serious dent in the problem. If we're serious.

  1. Punitive marginal tax rates. Back in the day, we had very high marginal tax rates (up to 90% on unearned income at times). There were lots of loopholes, for sure, but it really put a damper on super high salaries. Marilyn Monroe lived in, like, an apartment and Joe Dimaggio lived in a nice house. If either Marilyn or Joe were alive today, they'd be making $30 million a year, minimum. But back then, you didn't get to keep much of your income over $100k. Even CEO's of major corporations made around $5 million in today's dollars - good coin but what a run-of-the-mill senior VP makes today.
  2. Import Restrictions. Lots of the big bucks today are earned as bonuses when corporate executives off-shore jobs. So we not only have the big bonuses but also the unemployed workers who almost certainly will never get jobs as good as the one they lost. If we were to charge import duties with the intent of equalizing the cost of doing business abroad with that of the U.S., there would be a lot more people working for a lot better pay. Of course people's standard of living would also take a hit due to flat-screen TV's now costing $66 an inch rather than $33, but that's the tradeoff.
  3. Immigration Restriction. This is a no-brainer, yet is the least mentioned solution to the inequality crisis. Immigrants tend to be either low-skilled workers who decimate salaries at the lower end, or semi-skilled professionals who put a damper on the aspirations of the middle class. And then there's the small % of immigrants who become filthy rich - doing nothing really that special - how does that help the situation?
  4. Aggressive Anti-Trust enforcement. As little as the above are discussed, this one is really off the radar. But this was a powerful tool a century ago to reduce inequality. I don't know about Berkshire-Hathaway, but surely Facebook, Microsoft, Amazon and Google should at least be under investigation for engaging in restraints of trade.
Unfortunately, there's no one politician who would support all of these initiatives. Elizabeth Warren would go for 1 and 4, other Democrats would go for 1 and 2, some Republicans might favor 2 and 3, but most would oppose all 4. Obama has shown no interest in any of them.

But if we really want to reduce inequality, I can't think of any other policies that would actually do that.


Blogger Unknown said...

The 90% top tax rate is misleading. The top 5% income earners actually pay a higher tax rate today.

Until the 80s there were so many more tax deductions available that very few of the high income earners were taxed over 40%. In addition most states did not have any income taxes. Even New Jersey , which has the third highest income tax today, had no income tax until 1979, and today it reaches 9% in NJ.

In addition FICA taxes were much less, just 2% on the first 10,000 then 0 , while today FICA taxes are over 14% on the first 115,000 and 3% on All income.

Baseball players earn moe money today mostly because of TV, and government subsidies of stadiums. Prior to 1970, most teams built their own stadiums.

Film actors earn more today because the movies earn much more money, as they can obtain extra revenue from DVD sales, and distribution to cable TV and then regular tv. The studios are forced to pay them more because there is more competition and more money earned today. Nothing to do with tax rates.

January 26, 2014 4:52 PM  
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Blogger Luke Lea said...

A steeply graduated expenditure tax, which is like the income tax but with savings tax exempt, could raise a lot of revenue without reducing -- in fact increasing -- the incentives to save and invest.

Also, you forgot to mention the need for new statutory limits on the length of the working day to compensate for all the new labor-saving technologies that have come into play since the 1937 Fair Labor Standards Act.

Labor saving technologies raise worker productivity. However, workers don't get to share those gains unless there is a commensurate reduction in the hours of labor, resulting in higher hourly wages and more leisure time. A family friendly six-hour-day with triple pay for overtime would go nicely with an immigration moratorium and a factor-price equalization tax on low-wage imports from countries like China.

If you are like me, you probably don't read comments on your own blog.

September 19, 2014 8:47 PM  
Anonymous Anonymous said...

I agree with the immigration aspect. Not sure about the anti-trust; the record there is rather spotty.

If you want less inequality, get the government out of the way. So many things you can't do without a license or some other nonsense. Here are some links pointing out the problem. It's not these are all bad people for taking cash welfare payments compared to some douchebag crony capitalist who rakes the system, but if you bother look at the chart and look up states that have a poor business friendly rating, an interesting pattern emerges. It's not 100%, but pretty high.

Less inequality could also be alleviated by abolishing the Federal Reserve which creates inflation and lowering the taxes and fee on people's salaries. I recall living in a state with an income tax and working 4.5 months for local, state, and federal government before and after taxes.

The Number of People Per State That Receive Some Form of Cash Welfare

August 27, 2016 7:12 PM  
Anonymous kotmodhe said...

Your point about blocking all immigrants makes no sense. So low-skilled immigrants are a burden, and highly skilled immigrants unwelcome competition. So we shouldn't allow anyone to immigrate, and furthermore, it would be nice if we kicked recent immigrants out. Hell, why stop there? Let's take random citizens and kick them out. If they were low-skilled, we're relieving the burden on our welfare system, if they were high-skilled, we're reducing competition for a limited pool of jobs. It follows that the ideal economy contains 0 humans.

Sufficiently high skilled immigrants create jobs via consumption, but the question is if they create more than they take (1). The answer may indeed be <1, but this has nothing to do with the fact they're immigrants -- it's the general problem of technological unemployment which is going to kick us in the ass in the next few decades.

Or consider this: we annex a country, everyone living there is now an immigrant to the US. Did inequality improve or worsen? Obviously it depends on the country. We should be happy to annex Germany and accept highly skilled immigrants. The problem is orthogonal to unemployment.

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