Message 76 of 404 (659321) 04-14-2012 7:42 PM

Reply to: Message 75 by RAZD 04-14-2012 7:29 PM

There are lots of nations/economies with data to look at. It seems that we should be able to find data from those which have implemented trickle down policies (the US and UK are obvious examples) to see if these policies have had the proclaimed effect. We should also be able to compare these to other countries which have implemented more progressive policies (Scandanavian countries spring to mind) to see how they compare in terms of rising living standards for the majority.

That was more the sort of evidence I had in mind when I started this thread.

Message 77 of 404 (659322) 04-14-2012 8:24 PM

Reply to: Message 73 by Straggler 04-14-2012 6:56 PM

Your graph doesn't show what you think it does. Here it is again:

First, median household income rises and falls in rough sync with top 5% income, just at a lesser slope, but more importantly, look at this other graph conveniently provided by Dr Adequate:

Top 5% incomes begins taking off in the early 1980's because the drop in tax rates reduced incentives to invest in tax-free securities like munical bonds and to defer income into investment vehicles like trusts. Actual top 5% income didn't take off. All that changed was the amount of income that people were willing to expose to the income tax.

I do agree with the distinction you draw between wealth creation and wealth accumulation, but it isn't really that simple. Even accumulated wealth creates wealth, because as I said before unless they keep it in a mattress it gets reinvested.

I also agree with you when you say that it is the private sector that creates wealth, not necessarily just the rich, but the rich can do it on a much larger scale.

Yes, I know that you would prefer that the government squander their wealth for them.

--Percy

Edited by Percy, : jar => Dr Adequate

Message 78 of 404 (659323) 04-14-2012 8:56 PM

Reply to: Message 77 by Percy 04-14-2012 8:24 PM

The goal of Government is not "wealth Creation", it is "the Common Weal".

The goal of Government is providing services and creating social policy.

What really should be discussed and debated is "What services should be available to citizens?"

"What type of society do we want?"

"Do we want to see a 'hereditary moneyed class' created?"

"Do we want to minimize the gap between the rich and poor?"

After those questions are debated, the tools government uses are laws, regulations and taxes.

If we decide that we do not want to create a 'hereditary moneyed class' then tax estates.

If you want to fund services, tax business and individuals.

Tax where the money is regardless of the philosophy or method that got the money there.

Message 79 of 404 (659324) 04-14-2012 9:41 PM

Reply to: Message 77 by Percy 04-14-2012 8:24 PM

Or, alternatively, with GDP/capita, but at a lower slope.

It's that lower slope that's worrying us.

I am still not Jar.

And here was I thinking that when the Census Bureau measures income, they measure income.

Unfortunately they seem to be creating wealth principally for themselves, hence this thread.

It's not exactly the rising tide that lifts all boats, is it?

Message 80 of 404 (659332) 04-15-2012 7:13 AM

Reply to: Message 79 by Dr Adequate 04-14-2012 9:41 PM

Apologies. At least I'm consistent. I'll make fixes.

Income from tax free vehicles like municipal bonds is probably included as income, but the whole idea of tax shelters is to move income into categories where it isn't classified as income, or to defer income so it isn't classified as income in the year it is earned. Tax shelters of all types were a huge industry in the years before the Reagan tax cuts.

It would be interesting to see your CBO graphs plotted logarithmically. The nature of such charts that divide income into ranges is that categories can never go below zero while the upper end is unbounded. As long as the poverty level remains around 15% it's a close match for the bottom 20% in the chart and will stay close to zero. Minimally participating members of the economy do not benefit much from an improving economy.

The right hand chart tells a misleading story. The top 1% and top 20% categories move in tandem, but the other categories move oppositely. This is because of the unbounded upper range. When the median income for a category moves from, say, $30,000 to $40,000 but the total income moves from $3 trillion to $5 trillion then that category has lost share even though it has gained in real terms.

Economics isn't like physics where you can graph force versus distance and draw some firm conclusions. There are just too many variables. In economics you can take figures and plug them into equations and charts and graphs, but whether its been done in a way that tells us anything meaningful is exceedingly difficult to determine. That doesn't mean we should just throw up our hands and pray for divine guidance, but it does mean that one has to be very careful about drawing conclusions.

The question posed by the thread's title, whether trickle down works, is ambiguous. Undoubtedly trickle down happens, because in general the richer one is the more one spends, and the money one spends goes into the pockets of others who make what use of it they will (saving, investing, spending, etc.), and so on through the economy.

I think the thread's title is really asking the veiled question of who is better at disposing of the wealth of the rich to the betterment of all, the government or the rich themselves.

--Percy

Edited by Percy, : Fix several minor typos.

Edited by Percy, : Grammar.

Edited by Percy, : Typo.

Message 81 of 404 (659344) 04-15-2012 10:32 AM

Reply to: Message 80 by Percy 04-15-2012 7:13 AM

I'm sure people wouldn't report income on which they were evading tax to the Census Bureau, but not so sure that they'd withhold information about income on which they were avoiding tax. Why would they?

No it doesn't, it's labelled perfectly accurately.

Then we may assume that that's not what's being asked. No-one would start a thread to ask if the rich spend money.

And the presumption must be that someone who is trying to do something is more likely to actually do it than someone who is not. Few people, for example, have won an Olympic medal in the high jump by tripping on their shoelaces and falling over a pole.

Message 82 of 404 (659375) 04-15-2012 5:27 PM

Reply to: Message 81 by Dr Adequate 04-15-2012 10:32 AM

If the look at the income questions on page 11 of the 2012 Census Form you'll see that there are no lines for income from a trust, which is under the management of someone other than the person filing the census form. The income from the trust is not the beneficiary's income, and so he would not be taxed on it, nor would he report it.

As I said before, tax shelters were a huge industry before the Reagan tax cuts. When the top marginal tax rates were 70% and above I'm sure there were many creative schemes for avoiding taxes in addition to trusts. Stock options and grants with vesting periods are still common today, and that's another way to defer income.

I understand that you want to believe that the increase in income of the rich that began with the Reagan tax cuts as shown in Straggler's graph is not overstating the case, but before the cuts the rich were making more money than they reported as income. They were giving some of their money to their tax accountants and tax lawyers to protect their incomes, and when the Reagan tax cuts came in it wasn't worthwhile anymore and so they reported more income and paid higher taxes.

The reason the rapid rise in income of the rich isn't simultaneous with higher increasing income than shown on the graph is because the graph doesn't reflect the actual income of the rich prior to the Reagan tax cuts. If it did then federal income should have ballooned with that rising income of the rich, but as you can see from this spreadsheet it didn't, see the last two columns that I've added showing percentage annual change in total receipts and total outlays: Federal Receipts and Outlays from 1789 to the present

In other words, the rich have very little difficulty minimizing how much they pay in taxes, not matter what the tax rate.

Well, one would hope not, but it isn't really that dumb a question when expressed in its original terms and measured against other questions that have been asked here.

Adam Smith used the term invisible hand in arguing that people pursuing their own self interests contribute enormously to the greater good. I know you're a believer that government can accomplish what it sets its mind to, including allocation of resources, but as Straggler expressed so well a few messages ago, it takes both the public and private sectors. When it comes to the economy, I believe government should serve as overseers and regulators, not as participants. Of course, the huge size of today's governments proportional to GDP makes them a significant participant in many economies, and that's a reality that must also be taken into account.

--Percy

Message 83 of 404 (659383) 04-15-2012 5:57 PM

Reply to: Message 82 by Percy 04-15-2012 5:27 PM

Should health care or basic utilities like education, roads, telecommunications, sewer, water, power, police and fire services be "for profit commerce"?

Message 84 of 404 (659393) 04-15-2012 6:59 PM

Reply to: Message 82 by Percy 04-15-2012 5:27 PM

That would be question 47c, actually.

Try again.

But that's through their pursuit of profit, not their spending of their discretionary income. These are two different questions.

How about you tell me what you believe, and I tell you what I believe?

Edited by Dr Adequate, : No reason given.

Message 85 of 404 (659418) 04-15-2012 8:19 PM

Reply to: Message 84 by Dr Adequate 04-15-2012 6:59 PM

No, that's when a trust pays out. Income to the trust is not income to the beneficiary. Income to the beneficiary is when the trust pays out. It's somewhat analogous to a 401K where you pay no taxes on the income from the money already in the 401K, the difference being that a trust's income is declared against the trust and taxes on that income are paid by the trust, not the beneficiary.

I was trying to save you the trouble of thinking you had to reiterate what you said earlier. If I misunderstood you then just say so. If you just want to be a dick then piss off.

--Percy

Message 86 of 404 (659427) 04-15-2012 8:28 PM

Reply to: Message 85 by Percy 04-15-2012 8:19 PM

Which is what the phrase "income from a trust" means.

And income to the trust is not income from the trust. But income to the beneficiary is.

Message 87 of 404 (659469) 04-16-2012 6:50 AM

Reply to: Message 77 by Percy 04-14-2012 8:24 PM

It shows that only the richest are seeing any significant benefit from increased productivity. This is the very opposite of what trickle down theory predicts. Thus it remains refuted by the data available.

Median income rises and falls in rough synch with productivity per capita. That people's incomes rise the more they produce (and falls the less they produce) should hardly be a revelation to anyone.

The problem is that the benefits of increased production over the last few decades are focused almost exclusively at the top. This directly contradicts the key prediction of trickle down theory.

So you dispute that the data shows the wealthiest have benefited almost exclusively from increased national productivity? You think the steep rise in the graph for top earners is just a symptom of them revealing more of their income to the state rather than anything to do with them hogging the fruits of increased productivity at the expense of the majority?

It isn't that simple but you are still clinging onto the (as yet evidentially unjustified) assumption that wealthy person = superior wealth creator. This assumption needs to be supported with evidence or abandoned.

But why are the richest rather than the mass of middle or working classes best placed to make those investments?

The premise of trickle down economics is that those who are wealthy are also the entrepreneurial innovators who drive the economy forward. Unleash their animal spirits and we all benefit. So we are told. If you accept that in fact this is not the case the entire rationale for trickle down falls flat on it's face.

Why do you think extra money in the hands of a few wealthy investors is superior as a driver of the economy than that same money in the hands of small businesses or the consumers that small businesses depend on to grow?

You keep trying to make this about public Vs private expenditure. Actually if we are going to cut taxes to stimulate growth that benefits all I would like to see sales taxes and income taxes that affect the middle and working classes and small businesses cut INSTEAD of taxes for the wealthiest. I think this is a superior method of stimulating the economy than handing the wealthiest even more wealth (and with it even more political influence).

Because I think it is these things that create demand and thus jobs and eventually wealth that benefits the many rather than the few.

Then why does the data show increased national productivity benefiting the rich almost exclusively?

If nothing else will you answer that?

Edited by Straggler, : Spelling and shorten post.

Message 88 of 404 (659522) 04-16-2012 12:53 PM

Reply to: Message 52 by Percy 04-13-2012 10:35 PM

On average, who has a larger percentage of their annual income left at the end of the year? Those making a million dollars a year or those making 50k a year? From my experience, millionaires accumulate more money than the middle class, but I could be wrong on this.

Message 89 of 404 (659547) 04-16-2012 3:19 PM

Reply to: Message 83 by jar 04-15-2012 5:57 PM

That is a question. But it isn't really the question of this thread.

We have had a lot of talk about the right question or the real question or the veiled question. So let's state clearly what the question is here:

The implicit assumption of trickle down economic theory is that the wealthiest are members of some sort of entrepreneurial elite who will lead innovation and wealth creation if freed from the shackles of tax and regulation.

So the question of this thread is (to quote Mr Jack in an earlier post) whether setting up the structures of the economy so that the wealthiest are free to accrue as much wealth as they can is beneficial to people in general. That's what trickle down economics is about.

Edited by Straggler, : No reason given.

Message 90 of 404 (659552) 04-16-2012 4:02 PM

Reply to: Message 89 by Straggler 04-16-2012 3:19 PM

Agreed, it is not about whether or not trickle-down actually occurs - evidence shows that there is SOME effect -- but whether it is universally beneficial to all people involved as the theory and promoters claim.

As far as I can see, after some 12 years of bush-cuts the lower income people are worse off than before, on every document, graph, etc that has been provided. As far as I am concerned, this is objective evidence that the theory is a falsified failure.

But we don't know if lower income people given the same economic opportunities that the very rich inherit would not be as good at developing marketable products that result in increased wealth.

In addition, the wealthy do not act in isolation: if nobody else were involved - no makers of actual product, no consumers of actual product - they would be unable to accomplish their money making goals.

The people that actually produce and sell marketable products and the people that buy them are the ones that actually "make" the money. The economic environment, which includes the government rules and regulations as well as the supply\demand of various different kinds of products, is a significant part of the equation of productive success.

Enjoy.