OT: Income Inequality Part II
Tuesday, April 21, 2015 4:49 AM
I must say I was pretty surprised at the number of people who think that income inequality is a major problem in the US when I started this thread:
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I'm not really convinced that it is a problem. I think it's just become a meme the media is pushing and people are repeating because it's fashionable to do so. Something you say because everyone else is.
But maybe I'm wrong and there really is an urgent problem. I found that people did not elaborate much on what could be done about it. Again, just a knee-jerk restatement of a fashionable statement about an alleged problem, followed by a fashionable statement about what is to be done be done about it: "raise taxes on the rich". Can you folks help explain to me why the proposed solution would help and not do more harm than good?
Okay, you raise taxes on the rich. First of all there are issues with fairness here. Personally, I think it's disgrace to ask for this in the first places. If taxes need to be raised for the common good, okay, so be it. But making one group exclusively responsible for footing the bill for others? Can't believe what I'm hearing.
Then the places people want to see taxes increased: capital gains, dividends, inheritance. It seems people don't understand why the tax rates here are lower in the first place. It's because that money has been taxed already. Good back and re-read that a dozen or so times. This income has already been taxes. I'm shocked by how many who don't understand that basic point.
Ok but let's say that people can rationalize away the unfairness. How exactly does raising taxes on the rich help? Do you get that most of this money does not sit around idle? It is money the vast majority of which is invested in public markets, private ventures, give to charity or loaned out to the government via bond purchases? So you take away some of this money and do what? Spell this one out for me:
Just send checks to people below a certain income levels. Maybe with a note saying "Have a good time. On us. Yours truly, The Koch Brothers"?
Or you hire them to build roads and other infrastructure?
Or you just increase the salary of teachers thinking that is going to overcome the influence families and peers groups have on children? Because teachers say it will, but nobody can point me to the statistics showing it makes a difference?
In my view, the real problem is self-perpetuating cultures of poverty that cut across many races. This makes it hard for just throwing money at education to help fix the problem, because in these cultures education just is not fashionable. (Now I do think there is an experiment you could try to see if you could reach kids here early enough. But if might up the cost of education by a factor of 5, and it's nothing I've ever heard anyone propose. What I hear is just "increase teachers salaries" and it ends there.)
I think the current tax structure is not too bad and it's like it is for good reason. It's not some scheme to transfer money for the poor to the rich. In fact, if you look at hard numbers it's quite the opposite. It's very top heavy in how much the wealthiest carry everyone else.
I not sure tweaks to tax rates would do much at all, since it is other factors like the product cycle, and cultural factors regarding attitudes toward education, and work which have the deeper influence.
My view is that the best thing to do is just adopt policies which increase the general wealth. It might not feel fair if that means that risk taking activities need to have lower tax rates than back breaking manual labor if that increases the general wealth. But if that's the best way to deal with income inequality shouldn't it be done?
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