Rich Getting Richer, ever wonder why?

What do the poor get? Have you ever thought about that in the context of my question? In our tax code people in high marginal tax brackets have big incentives to do things that crate wealth on the other hand in the US tax code poor people have big incentives to do things to keep themselves poor.

For example I mentioned paying for a college education. A working poor family has every incentive to stay poor if they want to maximize aid for their children going to college. In some cases a theoretical $1 (I say theoretical because no person would allow $1 to get in the way) can prevent qualification of needs based government sponsored subsidies. This is wrong.

For example in the US tax code there is the Earned Income Tax Credit. A theoretical $1 could cost a person hundreds of dollars in tax credits.

For example child care tax deduction - spend the money on a government approved day care center get the benefit. Pay grandma or keep it in the family, get nothing.

 

That's not the way those programs work. The EIC and federal student financial aid scale based on income, and not very sharply. The net doesn't balance out, You have to earn way more than $100 to lose $100 in the EIC. The other thing is federal aid isn't a gift, it's a loan. Granted on some Stafford loans the interest was subsidized while you're in school, but the last round 'budget fixes' eliminated the Stafford loan subsidy.

 

there's a fundamental problem with university education costs, but nothing about what ace says even starts to address them.

 

I took a look at the Child Care Tax Credit a few minutes ago. The credit table shows at $15,000 or less the tax credit is .35 of available expenses up to $6,000. At $15,001 the tax credit is .34 of the available expenses up to $6,000. Even with these gradual increasing table (and many of these tax credits are not as "gradual) we have that theoretical $1 costing the poor person (.01 x up to $6,000) up to $60 in lost tax credit.

Are you taking the position that the above is anything other than a bad way for our tax code to operate? That is like a 6,000% marginal tax on that $1 of additional income. My point is that no reasonable person with a choice would let that happen.
--- merged: Sep 26, 2011 6:20 PM ---

I am not addressing the costs, I am addressing the incentives.

Assuming you have not read what I have written - My premise is that in many instances in our tax code the rich have an incentive to act in a way that causes them to get richer. In many instances in our tax code the poor have an incentive to act in a way that causes them to stay poor. Otherwise I have done nothing but present examples.

 

From the little bit of liberal in me, that is not a bad start. Primary education should be free. Higher education in public institutions should be based on merit, not the ability to pay, similar to the military academies. Tax payers should not be involved in supplemental education or private education provided by colleges, universities or other providers.

Never. Education is the equalizer, the thing that gives everyone an opportunity to realize their dreams. Our current systems requires expert navigation in order to get through it efficiently. Kids with the right parents or the right advocates get taken care of, the others fall through the cracks. This is not o.k. with me. When children are victims of circumstance I want to fix it. The current method is broken, and I think I know why.

I am sorry for my inability to articulate the point in a manner that is clear. Assuming the rich are getting richer there are reasons for it - I tried giving one reason and some examples.

If you disagree or don't get my point, fine, but what is your answer? Do you think rich people sit around plotting and planning how to keep poor people poor? I have been what people consider both poor and rich, and my way of thinking about either group did not fundamentally change when I was in either condition. I never saw gaining personal wealth something to do at the expense of others, in fact as I gained personal wealth i helped others gain personal wealth.

I really would like to read what people with a liberal mind set actually thinks on this point. It is not clear to me what the point of the "rich get richer" refrain is all about other than my assumption that is simply about getting and maintaining political power through a populist message.

 

No actual family with an adjusted gross income of $15000 is spending $6000 on child care; they don't have enough disposable income. No previously unemployed spouse enters the workforce for $1-60 per year (if present, both parents have to work to qualify for the credit). Nobody gets a one dollar per year raise, wage payers don't calculate enough decimal places. Nobody gets $60 (~$.03 / hr) for that matter.

I think the specifics are important here, the devil really is in the details on this one. Without a concrete example the point cannot stand. But, honestly, I willing to fold this whole line of disagreement. It's somewhat irrelevant because it's not really representative of the scale of the claim you were making. I didn't think we were talking about $1. I thought were we talking about poverty and class mobility. You don't go from working poor to middle class with a $1 raise, even on paper. What you have to show ace, is not that a few dollars could potentially be lost, but that these differences in rates manage to negate thousands and tens of thousands in increased income. You have to show that the incentives to stay poor are bigger than the incentives to climb the socio-econmic ladder.

Where is that in the tax code?

I can't find it.

 

Do I think that people accrue wealth because they want to stick it to the poor? No

Do I think that wealth constantly filtering upwards DOES stick it to the poor? Yes

Whether that's the intention of the wealthy or not, it's the reality

 

Our differing points of views is clearly one of those - forest v. trees things.

One correction. A family can pay grandma, keeping it in the family. However, if grandma provides the care in the home (rather than grandma's home), grandma most likely would be considered a domestic worker subject to the parents doing withholding on payments to grandma. what a world we live in!?! Many people either won't bother, pay under the table or run the risk of the IRS's ire.

Are you assuming that some poor people don't get "rich"? I think some wealth flows up along with some, smart, hard working, innovative, long-term thinking, etc., etc., poor people.​

 

Clearly. I guess I just lack the perspective required to notice the magnificence of this treeless forest.

 

I can appreciate the beauty of a forest from a broad perspective as well as the beauty of a forest tree by tree or the detail under magnification. It simply helps to know from what perspective the beauty is being discussed.

 

I want to address this point specifically, because it is bothering me.

First the credit calculation is based on adjusted gross income, not gross income.
Second, people seeking work can qualify for the credit, i.e. - a person can be unemployed for a half the year earn $15,000 and incur the $6,000 expense for multiple children during the year.
Third, adjusted gross income does not include child support payment.
Fourth, the table is consistent at higher levels of income until it max's out. Each cut off experiences a theoretical cost of $60 in the loss of credit for an additional $1 of income.

Perhaps, on reason some stay poor is they don't know when they are getting hit with a 6,000% marginal tax.

 

I thought this thread was going to address the reasons for the gap between the richest and the poorest in society increasing (rather than the reason that one person with more money can use that money to make even more money).

The reason is that it has been deliberate policy.

Whether that is seen as a good thing or a bad thing depends on one's financial well-being and social conscience, in my opinion.

 

I believe that's the whole idea. Most would enjoy being in a position to do exactly what you are able to do. But the current economic situation makes it nearly impossible for a growing number of Americans to do much more than keep a roof over their family's head and food on the table - nothing of any consequence left over to save or invest. Those struggling don't want your money, they want the opportunities back that enabled them to make their own and they want politicians to start legislating on their behalf instead of pandering to the godheads that have seen fit to plunder the American economy with no regard for the social impact it might have.

You sound like someone who has behaved responsibly through all the madness this last decade. Unfortunately, most of the country had not exactly been in a saving mood and easy access to credit had allowed personal debt to skyrocket catching many with their irresponsible pants down. But what do you expect from a society that has been suckled on consumerism since the womb? We're told we must spend to keep the economy propped up. It's our duty as loyal American citizens. Are we just supposed curb our spending because the price of everything is rising and our wages have been frozen for the last 5 years? Hell no. BoA is nice enough to extend credit to everyone and refinance everyone's mortgage above what they know the real property values to be. (and we all know what they did with those ugly mortgages) I don't know why we couldn't smell the stink of their supposed generosity then. And maybe this has taught us a lesson, in that respect. We're sifting through the ashes - wondering where all that money we never really had went - but also taking stock and owning up to our own hand in our personal predicaments (hopefully)

Meanwhile, up in the heavens somewhere, the godheads are rolling in dough. The richest 1% now have their hands on 99% of the wealth. How'd that happen? Well of course, it didn't "just" happen. It's accumulation has been carefully calculated and cultivated for decades. A congressmen here, a free trade agreement there. We were too busy at the malls they built for us to take notice. We let them schmooze us into believing we were all in this together, that we were simply reaping the benefits of a prosperous and healthy economy - all the while they were slowly but surely unraveling the fabric of the middle class and dooming the lower class to hell. We've been unbelievably stupid and they've been devilishly clever. And they ain't done yet. For all intents and purposes, they've sewn up the Congress (not a very big player anymore. From here on out their main function is simply to not interfere) and the Supreme Court (now there's an ace in hole every time). They've turned their focus to the individual states. Getting Republican governors elected who are more than willing to crush public and private unions, cut spending to the bone and turn the surplus over to "them" in the form of huge tax breaks. And so it goes.

To an extent, we deserve what we got but the perpetrators of this economic coup don't. Not in the way they got it.

Anyone who thinks this is simply about revising a few tax codes and moving that measly 1% around like a 3 card monte pea is, at the very least, naive. This is the war we need to focus on. This is the enemy among us.

 

Who or what is responsible for this?
Has there been a shift in thinking? When did it happen? Why?
If there has been a shift in thinking can it be correlated to the increasing wealth gap (assuming it is real)?

I am 51 the message I got (more from my grandparents than my parents) was to save, save, save. Buy with cash. Own property. Don't be flashy. Be proud (meaning don't depend on others or charity). Pay your debts. Help others along the way, as you have been helped. Etc. Etc. Etc. What has been the message you have been getting, and from who?

 

I think that since monetarism, there has been a move towards easier access to credit and greater social acceptance of using credit facilities. House prices also appeared to be on an ever-climbing slope. This gave people a sense of security in terms of the equity they held in their homes. Much of the Bush-era "growth" was down to spending of this "equity" as if it was real. And, of course, there was fast money to be made.

Blame is probably shared by those offering the credit-based lifestyle and those taking it up. Everyone appeared to gain from it (manufacturers, politicians, consumers, banks, etc.) and it became the norm for many people, despite warnings. It was, as we know, all based on a bubble and I don't think many people were prepared for quite such a savage.downturn.

What, I think, must suck most is that those who profited most from the freely available credit are still doing fine, thanks (e.g. the finance houses) while the consumers are paying the price. If you were to say that they were foolish and should have listened to their grandparents, I would agree with you. I had my share of foolishness too (using some equity to pay for kids colleges, for example.).

Maybe those who made the greatest gains during the "wild years" should be paying their share and sharing the pain - the worst off can't pay the bill on their own.

 

I look at some factors, for example the Federal Reserve they have been very aggressive at trying to manage interest rates and inflation since the 1970's - if rates are artificially low this would encourage excessive lending/borrowing. Another example is something like the home interest tax deduction - something like this encourages more borrowing, inflates housing prices, and encourages over-building. When looking at these factors, from I point of view, it usually goes back to government. I conclude many liberal government policies, including the "War on Poverty", are the primary reason for the increasing trend (if true) in wealth disparity.