Thread: Do you earn $30-500K?

BuzzFlash: There are some startling statistics in your book. You mention that in 1970 -- and I'll quote this; it's a paragraph -- the top 1/100th of 1 percent of Americans had about 1 percent of the income, and the bottom third had more than 10 percent of the income. Now they are equal, and just 27,000 people have as much income as the bottom 96 million Americans. And the number of people it takes today to account for 1 percent of all income -- well, in 1970, it was more than 20,000 people, and today, it's less than 400. How has this happened?

David Cay Johnston: President Bush actually explained this really well to people. President Bush says that the way to measure tax burdens is how much of your money do you get to keep. Now without quarreling with his interpretation, let's examine what he says. How much of your money do you get to keep? The more that you get to keep, the more you have the freedom to either spend it on your lifestyle today or save and invest for the future. Well, for people at the very top of the income pile, their tax burden has been falling, and they have more and more income to save and invest. Now if you are in the top group -- if you're making $10 million or more -- you can't spend your entire income unless you're a gambling addict or, actually, I don't know how you could spend it unless you're a gambling addict, because, if you're buying oil paintings, those don't lose value unless you're a complete idiot. You mostly are investing that income, okay? Well, investing works, as anybody who got in a 401k plan knows, over the long term. Forget about the downturn of the market right now. It's a snowball. You add new contributions to the snowball and the market returns part of it to you. And pretty soon the magic of compounding interest is bigger than your contribution, and that snowball gets bigger and bigger, and your income gets bigger and bigger. So that if you are relieved of a substantial burden of taxes, and you have the capacity to save substantial amounts, you will get wealthier and wealthier.

Meanwhile, people in the middle class and the upper middle class are confronted by two things. A growing share of their income is going to taxes, and we have seen falling wages for the bottom, about 40 percent, of Americans; stagnant wages for the next 40 percent of Americans; infinitesimal growth in income for the next 10 percent -- that brings us to the 90 percent percentile -- and this incredible concentration of incomes at the very top. When one-third of Americans belonged to unions, more than two-thirds of Americans benefited from that because there were employers who did not want to have unions, so they paid premium wages -- and by the way, tended to get the very best workers as a result, as classic economic theory says they should. Lots of low-level managers at companies, their wages were basically set by the unions. To the extent that we set up the rules to shrink unions, we drive down wages -- and America is the only nation in the modern world that is driving down wages.

BuzzFlash: That's extraordinary.

David Cay Johnston: They get a 15-cent-an-hour job in Malaysia making Nike tennis shoes -- that is a wage growth strategy for Malaysia. We are the only country in the world that is in the pursuit of lowering wages. And it's been a very successful program. So you combine all of those forces, and you can see why the data, the official government data, which were right there for anybody to report on, but nobody in Washington announced: Oh, the top 400 taxpayers -- it's actually about a thousand people when you count the spouses and children -- the top 1,000 people in America are earning more than 1 percent of the income, when 30 years earlier, it took more than 25,000 people to earn the top 1 percent of income in America. No one announced it, and, therefore, to most of the news media, it's not a story.

BuzzFlash: Again, to play devil's advocates on a political level, let's take Howard Dean. Howard Dean says let's roll back the tax cuts, and pundits and your fellow journalists, the ones on television, say that's political suicide. The American public -- you just can't tell them you want to roll back tax cuts.

David Cay Johnston: Well, if that's what you tell the American public, of course people would be against that. That's like the question that was asked by the opponents of the estate tax. Since the estate tax represents third, fourth and fifth taxation of the same dollar, and it's destroying American jobs, are you in favor of the estate tax? And, surprise, surprise -- 80 percent of Americans or 90 percent said no, they're against that tax. The question's not true. The people you see on television, in most cases, are not serious journalists. And many of those who are serious journalists, they're not investigative or enterprising reporters; they're political reporters. And they're telling you the perceived political wisdom. I don't do that. I do enterprise work. I decide what I think is news based on what I find, and this is what I've done my whole career -- well, maybe not the first five years when I was learning. But I decide what's news, and I go persuade my editors that it's news, and get it in the paper.

It is one of the great bad things happening in America -- that we do not have the degree of skepticism in journalism that we had in the 70s and the 80s. It is this constant acceptance of this official version of events. There's a very tricky number, Mark, to get to the real key people who do not want to pay taxes in America: the Koch brothers, the Mars family, Richard Mellon Scaife. (J. Howard Marshall Koch was the doddering old man who married Anna Nicole Smith). The people who've been financing the anti-tax movement have hired a whole coterie of very smart people in Washington to figure out how to design arguments that favor what they want, but make it sound like it's good for you. And one of the best ones they've got is: The top 1 percent of Americans pay 37 percent of the taxes -- that's for the year 2000, more than 37 percent. Well, actually, the top 1 percent, who made 21 percent of the income, paid more than 37 percent of the income taxes. When you look at all federal taxes -- gift taxes, estate taxes, Social Security taxes, Medicare taxes, excise taxes on gasoline and things like that -- the top group only pays 25 percent, which isn't much more than their 21 percent share of the income.

There is huge, yawning, enormous cavern that separates 30K from 500K. How about working with those numbers a bit, Lil?

Yeah, that's exactly the point. David Cay Johnston, author of "Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich and Cheat Everybody Else," The book on how the middle calss is getting ripped as the rich pad their pockets.

Read the article, if you weren't aware that this was going on, you will be enlightened...unless you make half a million a year


__________________________________________________ ______________
Exerpt from Buzzflash interview:


Who are the typical leaders in cities and towns across America? The minute you get away from Los Angeles and New York, and you go to Cincinnati, or Rochester, New York, or Anytown, America, what is the income level of the leaders of that community? $200,000 $300,000, $400,000, $500,000? There's a few people who make a million. There are one or two there who make $5 or $10 million. But for the core group, that's their income range, $200,000 to $500,000. They're being squeezed. And when your civic and local business leadership class is being squeezed it assumes the people above are being squeezed even more because that's what they see. But the people who make 10 or 100 times more are not being squeezed. And this false belief that the higher your income the bigger the share of it you pay in taxes is being exploited by people above them, so that the people at the very, very top who don't want to pay taxes can continue to benefit from tax relief. And the people down below haven't figured out that they don't have common cause with those people -- and are actually subsidizing those who make much more than they do.

People who make $200,000 are very well off. But they still go to work every day. They still have mortgages on their houses. They're not in the group of people who own a private jet, and have limousines, and own six houses. That's a totally different world. And innumeracy is a fundamental part of this problem. People don't grasp the difference between $200,000 and $200 million.

Income Polarization.
It isn't supposed to happen in the US. It happens in exploitative kingdoms and 3rd world countries.

aristocracy.. isn't that what we've created in this country?

I have heard that this book was a good read, someone on television recommended it.

Can anybody recommend some other good books dealing with financial topics?

While listening to working class man arguing against an inheritance tax, he thought that it was a unfair double taxation, hearing this I was thinking about the people who are way above his income level. Without an inheritance or estate tax, would this allow them to succeed huge amounts of wealth from generation to succeeding generations, each generation massing more wealth then the one before? How would this level the playing field for those born into poverty? Would this create family Dynasties?


There is no doubt that people at the highest income levels, which are financially affluent and can afford to hire the best financial advisors have an unfair advantage over those at the lowest income levels, who are just learning how the game is played.

Originally Posted by NewYorker

There is huge, yawning, enormous cavern that separates 30K from 500K. How about working with those numbers a bit, Lil?

The definition of rich is anyone who makes/has more money than me. That's why we are so vulnerable to the politics of envy. I envy no one who is wealthier than I, but I abhor the elite insiders who interchange wealth, power and influence at our expense.
I quit drawing a distinction between poor and wealthy, instead distinguishing between insider and outsider. There are many of both on the left and the right.

Originally Posted by NewYorker

There is huge, yawning, enormous cavern that separates 30K from 500K. How about working with those numbers a bit, Lil?

Why?

Those are the numbers. You want the numbers changed for what reason? My household income is over $100,000 and so is that of most of my circle of friends. 30k to 500k is a good range for the demonstration of the effect of Bush's tax cuts.

And any attempt to sub-divide this category plays into the hands of the super-rich by dividing the opposition. The people making $100,000 to $250,000 are not rich - they are just successful middle class.