INCOME INEQUALITY IS GOOD

[Martin Marprelate]

That phrase "invest in the economy" is quite nebulous.

The way to get the economy going is to have an increased demand for goods and services. The best way to do that is to have millions of middle class people keeping more of their money so they can spend it on middle class things like appliances, furniture, electronics, dining out, etc. Better to have millions of middle class people doing this than having a thousand uber-wealthy buying jewelry, country club dues, art work, or some more Apple stock. Middle class people buying goods and services creates demand which creates jobs.

So give the lion's share of the tax cuts to the middle class. The rich should get one too, just doesn't need to be as big as the middle class's.

Yes, but economic policy should aim at supporting the poorest in society so as to raise them to the 'middle classes' so that they can buy lots of stuff. It makes no sense to have a large, permanently poor, segment who are largely inactive economically, a drain on the public purse and potentially a hive of criminality (cf. Proverbs 30:7-9).

Also, it's the right thing to do cf. Galatians 2:10.

 

[Salty]

Do I really have to point out the flaws in this story, again? It would be the third or fourth time.

I suppose so

 

[Revmitchell]

Yes, but economic policy should aim at supporting the poorest in society so as to raise them to the 'middle classes' so that they can buy lots of stuff. It makes no sense to have a large, permanently poor, segment who are largely inactive economically, a drain on the public purse and potentially a hive of criminality (cf. Proverbs 30:7-9).

Also, it's the right thing to do cf. Galatians 2:10.

Not if it is via government, which by the way is not necessary.

 

[InTheLight]

Yes, but economic policy should aim at supporting the poorest in society so as to raise them to the 'middle classes' so that they can buy lots of stuff. It makes no sense to have a large, permanently poor, segment who are largely inactive economically, a drain on the public purse and potentially a hive of criminality (cf. Proverbs 30:7-9).

Also, it's the right thing to do cf. Galatians 2:10.

1. The poor don't pay income taxes (generally speaking) so no tax cut is necessary. We were talking about tax cut policy.
2. The poor should not rely on government to "raise them up to middle class". The poor should have every opportunity to improve themselves and achieve this result on their own. The government handing them money so they can "buy stuff" is misguided policy.
3. There should be a safety net for poor people. Medicaid, Social Security, welfare, unemployment, etc.

 

[Salty]

1. The poor don't pay income taxes (generally speaking) so no tax cut is necessary. We were talking about tax cut policy. ..

And that is one of the main points in post # 19

 

[InTheLight]

I suppose so

OK. Here is where the error in the analogy begins.

"I'm going to reduce the cost of your daily dinner by $20.
Lunch for 10 now cost just $80.
The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected.
They would still eat for free.
But what about the other six men, the paying customers?
How could they divide the $20 windfall so everyone would get his fair share??
They realized that $20 divided by six is $3.33.

There is no $20 windfall to "split up". The restaurant owner never gave them $20 to split up. Instead of the restaurant owner giving the diners $20, the cost of the lunch has been reduced, so there is a new lower amount to be proportioned out.

Here's how it should be analyzed. The bill is no longer $100, the bill is now $80. Thus:

The first four guys paid 0% of the bill before, they will pay 0% of the bill now.
The fifth guy paid 1% before ($1.00), he pays 1% now, or $.80.
The sixth guy paid 3% before ($3.00), he pays $2.40 now.
The seventh guy paid 7% before ($7.00), he pays $5.60 now.
The eighth guy paid 12% before ($12.00) he pays $9.60 now.
The ninth guy paid 18% before ($18.00) he pays $14.40 now.
The tenth guy paid 59% before ($59.00) he pays $47.20 now.

This would be the fair way to split up the bill if they wanted to keep all "diner rates" proportionally the same.

Similarly, tax cuts are not money the government gives you to divide up, it's money they no longer take from you. But what if you were to apply the Bush tax cut percentages--rates went down 4.6% for the wealthy and 3% for the next three brackets--to the meal, you would reduce each diner's original percent of the $100 bill by an equivalent amount. Thus:

The richest guy was paying 59% of the bill when the lunch was $100, now he will pay 54.4% of the $80 bill, or $43.52.
The next richest guy was paying 18% of the bill when the lunch was $100, now he will pay 15% of the $80 bill, or $12.00.
The next guy was paying 12%, he will now pay 9% of $80, or $7.20.

...and so on.

The way you've got it described is exactly like the old problem with the 3 guests staying in the hotel and they are charged $30 for the room. But then the manager realizes the room should have cost only $25 so he sends the bellhop up to the room to give each person a dollar and to keep two dollars for his trouble. So now each person has paid $9 each, or $27 total, and the bellhop kept $2, so that's $29. What happened to the other dollar?

 

[Salty]

keep in mind that you can say anything you want with figures.

First you cannot equate a $20 tax - with a $20 reduction in a bill - as you are paying for a direct product - unlike taxes.

but the bottom line is that the richest man should save the most- as he was paying the largest %

Problem is folks normally only look at things from their personel perspective.
We need to look at all three sides of an issue.

Of course, the situation can be worse as many people pay negative taxes - ie "earned income credit"

Some folks complain that the richest pay no income tax - due to the loopholes.
For the sake of arugment - lets say that is true - then take a look at the property tax they pay
Generally no loopholes there. Same with sales tax. - Now you might complain that "Richie" is able to afford a
$100,000 vehicle - but on the other hand - he is paying (in Some States/commonwealths) some $10,000 tax!!!!
and in some S/C he has to pay an annual personal property tax on that vehicle ( say $1,000 a year)

This is why I get upset when people say that the rich do not pay their fair share of taxes.

So yes, my example is a very good analogy of taxes. Those who pay the least, tend to complain the most.


Salty

PS - I used to drive taxi for Medicaid - and again those Medicaid clients complained a lot more that full paying fare customers.
(you do realize that Medicaid clients pay ZERO dollars for those taxi rides. To be honest - I never remember anyone from Medicaid ever
giving me a tip.

 

[TCassidy]

3. There should be a safety net for poor people. Medicaid, Social Security, welfare, unemployment, etc.

I agree and disagree. I believe there should be a safety net to provide for those unable to provide for themselves. But not via Medicaid, Social Security, welfare, unemployment, etc.

If a person cannot provide for themselves then if they are hungry we should feed them. If naked we should clothe them. If homeless we should house them. If sick we should provide medical care.

But not one dime should be given to them.

And you have mixed four very different programs.

Medicaid is a form of welfare. Nobody paid into Medicaid. It is 100% taxpayer funded.

Social Security is not welfare. I paid into my SS account for almost 60 years. That money has been earning interest since 1958. It's mine. I earned it. And nobody who has not paid into the SS system should get a dime out of it.

Welfare is taxpayer funded. Stop all welfare payments. Feed, clothe, house, and provide medical care to those in need. But not a dime of unearned money taken from the pockets of hard working people.

Unemployment is employer funded and no individual taxpayer is taxed for unemployment benefits. It is not welfare. It is part of a total compensation package funded by employers but (obviously) paid by the consumer via higher prices for goods, and by the employee with lower hourly wages.

 

[InTheLight]

keep in mind that you can say anything you want with figures.

Yes, which is exactly what your lunch diner story is doing. It is taking a story about proportionally paying the bill and introducing a completely fabricated segment about the diner's getting a $20 windfall. They never got a windfall. There is no $20 to "split up". For this to be true the diner's would have to spend $100 for their lunch, pay the restaurant owner the $100, and then have the owner come back to the table and present them with a $20 Andrew Jackson to split up amongst themselves.

What your story is doing is reducing the lunch tab to $80. This amount is the amount that should be split up proportionally.

First you cannot equate a $20 tax - with a $20 reduction in a bill - as you are paying for a direct product - unlike taxes.

I'm not doing that. I don't even know where you are getting that from.

but the bottom line is that the richest man should save the most- as he was paying the largest %

Yes, the richest guy should save the most money precisely because he is paying the most. His percentage of $100 is the most so his gross dollar amount saved should be the most. And here is where you are getting confused--gross dollars vs. percentage of dollars.

From the story:
The tenth now paid $49 instead of $59 (savings only 16%).

Again, your analogy has these guys splitting up the phantom $20 that they never received, then it makes a percent calculation from the amount he originally paid! That's dishonest. Look, you can't say the guy is getting $10 of the $20 savings and that is only 16% savings. He's getting fully 50% of the savings! This is the problem with the story--it mixes up the methods used to calculate savings.

From the story:
The sixth now paid $2 instead of $3 (savings 33%).

The guy is getting $1 savings from the bill being reduced from $100 to $80. That's a 5% savings, not 33% savings.

 

[TCassidy]

Let them all buy their own lunch. Problem solved.

 

[LowOiL]

Don't you mean "we, the 1%?" Anyone making over $32,000 per year is in the 1% globally.

Exactly... already can tell I am gonna be quoting you for truth (QFT) quite often.

Often people never completely realize just how good we have it in the west compared to the rest of the world. I have kids mowing yards that are making more than some do in other countries. In about half of Africa to this day they live on roughly 2 dollars a day.