US billionaires paid lower tax rate than working class in 2018

OldWiseGuy · Oct 11, 2019

Belk said:
Then they are not biblical principles they are universal principles.

Sure. God instilled them in most people. But to Israel then and the church today he said , "Seriously folks".

Romans 2:14-15 King James Version (KJV)

14 For when the Gentiles, which have not the law, do by nature the things contained in the law, these, having not the law, are a law unto themselves:

15 Which shew the work of the law written in their hearts, their conscience also bearing witness, and their thoughts the mean while accusing or else excusing one another

Larniavc · Oct 11, 2019

FenderTL5 said:
that's the point.

G’ah!

Hoist by my own petard!

OldWiseGuy · Oct 11, 2019

The IbanezerScrooge said:
You and I have had very similar career experiences.

I started working in high school and built a reputation for being a reliable and capable employee. I was able to work my way up through promotions. I'm in my mid-forties and can count on one hand the number of jobs I've had in my life. I've always made well above minimum wage. I have never been at a job for less than a year. I also, with the exception of 1, have never been turned down for a job for which I have applied.

My first big hit financially was student loans and credit cards. I was too young to be given that temptation and ran up debt pretty early in college. Looking back on it now, it doesn't seem that bad, but it set me up for some not-so-good habits/susceptibility to temptation. Once you start using credit cards it's easier to continue.

The second hit I took, and I would never place the blame completely on another person, was getting married. It's a whole lot easier to manage your own finances without needing to consider the feelings, opinions and needs of other people. Then the kids come and the expenses of a full blown family. I've been simmering in debt and expense for a while and need to get a handle on it. I think the family is finally on board with the austerity needs to happen. It was a long time coming.

So, now that we feel like we can move forward we're planning out the paying off of debt and reducing expenses. But I know that's not enough especially this late in the game of life. There has to be more investment and the lottery is too hit or miss.... mostly miss.

My real interest is in what strategies with saving and investing you used and possibly what investment vehicles worked best for you. My dad did something similar to what we're talking about but he had some avenues available to him that are no longer good options. So, I try to get lots of different perspectives and strategies. It sounds macabre, but our current best realistic chance for financial security are the deaths of our parents and the inheritance we'll get from that which will be helpful in the short term, but will still fall short. :-/

Family expenses (and tithe paying church membership) kept me in the poorhouse for many years. Now I'm divorced, the kids are grown, and I'm no longer tithing (I give to various charities instead).

I work for a rental property business and early on wanted my own rental property (have since I was about 20). It took 10 years to save that $20,000, which combined with another $20,000 borrowed from my boss I bought an 8-unit.

I used all the profits to upgrade the building and pay off the mortgage, which I did in 10 years. I filed for SS benefits at age 63 and used that money as well to pay off the mortgage.

I have not spent a penny of the profits from rents, appreciation (sold the building after 18 years), or SS benefits, saving and investing all of it. I make enough on my job to cover all my needs and then some.

I have invested my money solely in FDIC and NCUA protected CD's. I stay away from the up's and down's of the stock market (I sleep much better) preferring the safety of these protected instruments. I'm in no hurry and have no specific money targets, but $100,000 annual income and $1,000,000 in savings feels pretty good.

My original purpose for the rental property was to provide for my retirement (which I'm in no hurry to do) and to give a leg up to my kids and grandkids. I'm not comfortable spending a lot of money on myself as my needs are few, thus I'm able to save a pretty fair amount each year.

I also have to be prepared for the possibility of large medical costs when I'm no longer fully insured in retirement. I have CAD (coronary artery disease) and my heart is a ticking time bomb that will eventually put me back in the OR, or the bone orchard.

I also will buy a home when I retire. My employer has provided my dwelling for the past 40 plus years. I will likely secure a mortgage for it so monthly costs will be minimal, like paying rent, so I can keep most of my dough intact.

So my fortune will be eaten into in retirement but I should still have enough to live well with a good chunk to leave to my family.

4

ThatRobGuy · Oct 11, 2019

Ken-1122 said:
The average household income (adjusted for inflation) is up, and unemployment is down.

Real Median Household Income in the United States
Trump on Unemployment Claims

When unemployment is down, this often forces lower paying jobs to raise their wages to compete with the higher paying jobs.
https://www.latimes.com/business/la-fi-target-salary-20170925-story.html

Bloomberg - Are you a robot?

Humm... Sounds like a recipe for the poor doing better than ever! What do you think?

You said "average", yet the statistics you linked are for the median.

Those are two totally different things

Here's an example showing the median income outcomes of two sample populations:
A)
$40,000
$40,000
$60,000
$150,000
Median of $50,000

B)
$15,000
$20,000
$95,000
$250,000
Median of $57,500

Median income went up, however, you now have more income inequality and more people in poverty than before.

It should also be pointed out that the US Census even acknowledged that the increase in their Median figure can be attributed to the fact that they changed the questions on the census.
Highest Median Household Income on Record?

Ken-1122 · Oct 11, 2019

ThatRobGuy said:
You said "average", yet the statistics you linked are for the median.

Those are two totally different things

Here's an example showing the median income outcomes of two sample populations:
A)
$40,000
$40,000
$60,000
$150,000
Median of $50,000

B)
$15,000
$20,000
$95,000
$250,000
Median of $57,500

Yes; let me rephrase. The median household income adjusted for inflation is up.

ThatRobGuy said:
Median income went up, however, you now have more income inequality and more people in poverty than before.

You're saying in an economy where unemployment is at record lows, and MEDIAN household income adjusted for inflation is up, that poverty is actually up as well? Do you have an outside source to confirm this? Where did you get this information?

ThatRobGuy · Oct 11, 2019

Ken-1122 said:
Yes; let me rephrase. The median household income adjusted for inflation is up.

You're saying in an economy where unemployment is at record lows, and MEDIAN household income adjusted for inflation is up, that poverty is actually up as well? Do you have an outside source to confirm this? Where did you get this information?

I linked it in my post, it's directly from the US Census, who openly acknowledged in the article that they changed their questions which contributed to the number being offset in the positive direction.

As far as the example provided, that's just utilizing the mathematical formula for determining the median, nothing really to debate there as it's a standard mathematical formula demonstrating that the rich can get richer while the poor get poorer, and still have the median income rise.

The top 5% can get tremendously richer while the lower and middle class groups get a raise that's lower than the rate of inflation, and still have the median and mean income rise.

This website is a handy tool that has all of the formulas built in if you want to try it out.
Mean, Median, Mode, Range Calculator

Here are two scenarios.
Scenario A)

Scenario B)

This example highlights how, even with the same number of total assets in circulation, you can still have a scenario where you have more poor & struggling people, but have the median income increase by a noteworthy amount and have unemployment drop.

Ken-1122 · Oct 11, 2019

ThatRobGuy said:
I linked it in my post, it's directly from the US Census, who openly acknowledged in the article that they changed their questions which contributed to the number being offset in the positive direction.

As far as the example provided, that's just utilizing the mathematical formula for determining the median, nothing really to debate there as it's a standard mathematical formula demonstrating that the rich can get richer while the poor get poorer, and still have the median income rise.

The top 5% can get tremendously richer while the lower and middle class groups get a raise that's lower than the rate of inflation, and still have the median and mean income rise.

This website is a handy tool that has all of the formulas built in if you want to try it out.
Mean, Median, Mode, Range Calculator

Here are two scenarios.
Scenario A)
View attachment 264866

Scenario B)
View attachment 264868

This example highlights how, even with the same number of total assets in circulation, you can still have a scenario where you have more poor & struggling people, but have the median income increase by a noteworthy amount and have unemployment drop.

I know in theory is it possible for the rich to get richer, while the poor gets poorer, but when has this ever happened in the USA? Do you know of a year or time period when this has actually happened?

ThatRobGuy · Oct 11, 2019

Ken-1122 said:
I know in theory is it possible for the rich to get richer, while the poor gets poorer, but when has this ever happened in the USA? Do you know of a year or time period when this has actually happened?

It's not just in theory at this point, there are numerous statistics that show that it's been happening consistently for a few decades now

https://www.washingtonpost.com/busi...n-since-census-started-tracking-it-data-show/

US income inequality continues to grow

Income Inequality - Inequality.org

U.S. income inequality at highest level in 50 years, growing gap in heartland

Decades of rising economic inequality in the U.S.: Testimony before the U.S. House of Representatives Ways and Means Committee

Income Inequality in America: Growth and Statistics

World Inequality Report 2018. The poor keep getting poorer and the rich richer - LifeGate

Data suggests that this has been happening, consistently, for the past 40 years.

Ricky M · Oct 11, 2019

Ken-1122 · Oct 11, 2019

ThatRobGuy said:
It's not just in theory at this point, there are numerous statistics that show that it's been happening consistently for a few decades now

https://www.washingtonpost.com/busi...n-since-census-started-tracking-it-data-show/

US income inequality continues to grow

Income Inequality - Inequality.org

U.S. income inequality at highest level in 50 years, growing gap in heartland

Decades of rising economic inequality in the U.S.: Testimony before the U.S. House of Representatives Ways and Means Committee

Income Inequality in America: Growth and Statistics

World Inequality Report 2018. The poor keep getting poorer and the rich richer - LifeGate

Data suggests that this has been happening, consistently, for the past 40 years.

Can you provide a link or something that shows a time in the USA when this has happened? The above links speak of the gap between the rich and poor growing; this has nothing to do with my question.

SimplyMe · Oct 11, 2019

Ken-1122 said:
Can you provide a link or something that shows a time in the USA when this has happened? The above links speak of the gap between the rich and poor growing; this has nothing to do with my question.

Hopefully this will give you what you are wanting, it provides a lot of data.

Ken-1122 · Oct 11, 2019

SimplyMe said:
Hopefully this will give you what you are wanting, it provides a lot of data.

Yeah it was a lot to read; Though I didn't read the entire thing, I did scan over it and I didn't see anything in there that spoke of a time when the rich got richer while the poor got poorer, it was mostly about income inequality.

SimplyMe · Oct 11, 2019

Ken-1122 said:
Yeah it was a lot to read; Though I didn't read the entire thing, I did scan over it and I didn't see anything in there that spoke of a time when the rich got richer while the poor got poorer, it was mostly about income inequality.

Then maybe you should actually read it. For example, near the beginning:

Beginning in the 1970s, economic growth slowed and the income gap widened.

Income growth for households in the middle and lower parts of the distribution slowed sharply, while incomes at the top continued to grow strongly.

The concentration of income at the very top of the distribution rose to levels last seen 90 years ago (during the “Roaring Twenties”).

A lot of it, also, tends to get lost with inflation -- that while "the poor" may see income increases -- that frequently the increase is lower than the rate of inflation -- meaning that although they technically have more money a year later, their purchasing power is lower -- making them poorer.

There is also the increase of women in the workforce, particularly the number of poor and middle class households that have two people working full time. So, while family income levels have remained relatively flat, after adjusting for inflation, many of those households now require two incomes to match the income levels in the 1960s.

Additionally, the two frequently go hand in hand -- if the rich are getting richer and the poor poorer, then income inequality is getting worse. You might also check out the Wikipedia article "Middle Class Squeeze" to see, particularly in the links, to see if you can find the information you are wanting.

TheNorwegian · Oct 12, 2019

SimplyMe said:
I can't agree with the idea they are "assimilated" into the culture. In fact, wasn't that the primary complaint of Anders Breivik, when he went on his murder spree?
.

I do not think you should use Anders Breivik's analysis as a valid argument. He is totally delusional

ThatRobGuy · Oct 12, 2019

Ken-1122 said:
Can you provide a link or something that shows a time in the USA when this has happened? The above links speak of the gap between the rich and poor growing; this has nothing to do with my question.

The links provided did have some examples of that happening.

The mistake many people make is that they assume that if poor peoples' incomes have risen by more than the rate of inflation, that must mean "the poor are less poor than they were before"

In order for that to be true, the cost of all goods & services (especially critical ones like housing) would have to rise at a rate that's lower, or equal to, the rate of inflation.

Now, that does happen with the consumer pricing index for certain items, however, the most critical thing to look at (with regards to seeing if someone is in a better position) was/is housing costs. All other things considered, housing is the number one cost in a person's monthly budget. Whether or not they have more potato chip or television buying power now is mostly insignificant when compared to housing.

So, for instance...

Let's say you have a person who makes $15k/year in 2000 as we'll use that as a starting point.

Adjusted with the rate of inflation, in 2019, that would be like making $22,365.77.

According to the US Bureau of Labor statistics, the formula for calculating the rent inflation rate based on the consumer pricing index is:

Therefore, an apartment that was $700/month in 2000, is roughly $1,250 in 2019.

Rent that's $1250/month has a larger negative financial impact on a person making $22,365 in 2019 than $700/month rent did on a person only making $15,000 in 2000 when you consider pricing inflation on other items (like transportation, food, etc...)

When you look at the historical data for the past 20 years, in every year (with the exception of 2010-2011, the Rent CPI has increased by a rate that's larger than both the inflation rate, and real wage growth rate (meaning, the actual wage percentage increase after inflation is factored in).

Ken-1122 · Oct 12, 2019

ThatRobGuy said:
The links provided did have some examples of that happening.

The mistake many people make is that they assume that if poor peoples' incomes have risen by more than the rate of inflation, that must mean "the poor are less poor than they were before"

In order for that to be true, the cost of all goods & services (especially critical ones like housing) would have to rise at a rate that's lower, or equal to, the rate of inflation.

But housing costs are factored in the rate of inflation. Some things factored into the rate of inflation is above inflation and other things below the rate.

Ricky M · Oct 12, 2019

Ken-1122 said:
Yeah it was a lot to read; Though I didn't read the entire thing, I did scan over it and I didn't see anything in there that spoke of a time when the rich got richer while the poor got poorer, it was mostly about income inequality.

Still, WOW. What do you think income inequality is??? That's the 21st century term for THE RICH GETTING RICHER WHILE THE POOR GET POORER.

ThatRobGuy · Oct 12, 2019

Ken-1122 said:
But housing costs are factored in the rate of inflation. Some things factored into the rate of inflation is above inflation and other things below the rate.

They're factored in, however, housing costs as a whole are only around 35% of the cumulative CPI, and rent prices are are just subset of that (coming in at just over 15% of the cumulative CPI).

Rent price history from 2000 through 2019

There are numerous articles outlining and going into detail about housing and rent costs are rising at a rate that's significantly higher than the overall/avg rate of inflation. In some locales, they're rising at a rate that's double the rate of overall inflation.

Why that's such an important distinction is because things like housing and transportation are critical, while things like toys, dining out, electronics, etc... are not.

If a person on a tight income has their rent increase by 30% over a period of 5 years, even with 3% annual raises over that time period, and even if the cost of all other goods & services went down by an inflation-adjusted 3%, they're sill worse off.

The reason why they're worse off is simple, how much one can take advantage of lowered costs of everything else is dictated by how much money they have leftover after critical/core things are covered.

A simple math exercise can illustrate this

2014:
If a person who takes home $1300 a month was paying $850 for rent.
(they have $450 2014 dollars to work with after rent is covered for other purchases)

2019:
If they consistently got that aforementioned 3% raise every year, for 5 years, that now puts them at just over $1500 month. With the 30% rent increase, their rent is now $1105 per month
(they now have $395 2019 dollars to work with after rent is covered...you adjust that for inflation to compare it to put it in 2014 dollars, it's actually ~$365)

Even if the inflation adjusted amounts of everything else got cheaper by 3%, they're still worse off.
The fact that their 2014 $100 (adjusted for 2019 inflation $108.46) grocery bill had a CPI reduction of 3%, thus putting it at $105.20 in 2019 (instead of the $108.46 it would've been had it trended with inflation) does very little to offset that rent increase.

LoveOurNeighbor · Oct 12, 2019

essentialsaltes said:
A new book-length study on the tax burden of the ultrarich begins with a startling finding: In 2018, for the first time in history, America’s richest billionaires paid a lower effective tax rate than the working class.

But the tipping point came in 2017, with the passage of the Tax Cuts and Jobs Act. That bill, championed by President Trump and then-House Speaker Paul D. Ryan, was a windfall for the wealthy: It lowered the top income tax bracket and slashed the corporate tax rate.

By 2018, according to Saez and Zucman, the rich were already enjoying the fruits of that legislation: The average effective tax rate paid by the top 0.1 percent of households dropped by 2.5 percentage points. The benefits the bill’s supporters promised — higher rates of growth and business investment and a shrinking deficit — have largely failed to materialize.

hard for them to come close to matching the disparity with SSA contributions,,,but they are trying

Ken-1122 · Oct 12, 2019

SimplyMe said:
Then maybe you should actually read it. For example, near the beginning:

(quote from article)
*Beginning in the 1970s, economic growth slowed and the income gap widened.

Income growth for households in the middle and lower parts of the distribution slowed sharply, while incomes at the top continued to grow strongly.

This simply says income growth for middle and lower parts slowed; it does not say it retracted, or that the poor got poorer.

SimplyMe said:
(quote from article)
*The concentration of income at the very top of the distribution rose to levels last seen 90 years ago (during the “Roaring Twenties”).

This one says nothing about the poor.

SimplyMe said:
A lot of it, also, tends to get lost with inflation -- that while "the poor" may see income increases -- that frequently the increase is lower than the rate of inflation -- meaning that although they technically have more money a year later, their purchasing power is lower -- making them poorer.

Okay if I understand you correctly, you are saying there were times when inflation was so bad it outpaced whatever increases in pay the poor got but did not outpace the increases of the rich thus adjusted for inflation the poor got poorer while the rich got richer; is that the point you are making? If so, I can see that happening; however the link you provided did not make that point that just seems to be a point you’ve made. The only points the link seems to make are about income inequality which has nothing to do with the poor getting poorer.

SimplyMe said:
Additionally, the two frequently go hand in hand -- if the rich are getting richer and the poor poorer, then income inequality is getting worse.

I disagree! When the economy enters a recession, everybody suffers; the rich usually lose the lion’s share of the wealth and the poor lose a little; with the middle class losing somewhere in between. When the economy thrives, the rich retains the lion share of the growth while the poor gain a little with the middle class somewhere in-between. there are countless examples of this happening, like the last recession of 2008 we had where the super rich lost billions and the poor maybe lost their jobs (what’s a 30,000 per year job compared to billions) so the gap between the rich and poor shrunk during that time. When thing began to recover the super rich got their billions back, and the poor got their low paying jobs back. (again; what’s billions compared to a $30,000 per year job) thus the income gap grew during that time.

US billionaires paid lower tax rate than working class in 2018

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