Thursday, March 7, 2013

Speaking of income...

I'm interested in what you think of this video.   It's 6 minutes long.   Well worth your time. 


plummerj said...

I've seen graphs making the same point in a different way.In essence, all the productivity gains of the last twenty years haven't translated into any income growth for the middle class. It all went to the top, and the poor actually lost ground. Ezra Klein is one good source.

This is what the spending taxes debate is all about--hanging on to that tremendous inequality.

solagratiasnohomish said...

This is extremely dishonest. There's wealth in guaranteed government benefits at the lowest quintile, but that is not accounted for at all because this is yet another attempt at class warfare on the 100k earners while the actual rich elite folks sit on the sidelines and laugh and count their cash from providing the cards the benefits come printed on.

Bruce King said...

Government benefits aren't means-tested nor exclusive. The top end of the chart and the bottom end are both entitled to social security and medicare/medicaid. But the benefits paid for the richer end of the scale are greater than the poorer-- social security increases as your income does.

Since the benefits are equally available, I don't see your point.

"The law, in its majestic equality, forbids the rich and the poor alike to sleep under bridges, to beg in the streets, and to steal bread." - Anatole France

solagratiasnohomish said...

The government benefits are structured in ways that make it hard for people who are in real need to access them, while generational recipients just trade the information around. I'm not really referring to SS/Medicare.

I do live near Oregon, where about 20% of the population lives off generous state benefits, and there is multigenerational not-working by adults as a result.

I am not at all saying poor people are tooling around in Bentleys. I am saying the inequality picture is complicated when a single mother is essentially paid to not try to climb very high out of poverty because she'll lose free or nearly free daycare, free utilities, free college, etc. There have been plenty of articles about these 'welfare cliffs' that make it nearly impossible to climb out of the lowest two quintiles.

Bruce King said...

Sola -- where do you get the 20% lives off of generous state benefits? What benefits are you looking at?

I'm seeing food stamps, Women Infants and Children (WIC) nutrition programs. Possibly free lunch at school... Have I missed anything?

solagratiasnohomish said...

Yes, you've missed a bunch. There's subsidized daycare, grants for college (not loans!), LIHEAP (utility assistance), rent (section 8 isn't the only program), EITC (which has a 50% fraud rate due to the marriage penalty)and lots more. Some states offer more additions to the federal stuff than others, but there is a lot of government help out there for the lower quintiles.

It is not set up in a useful or sensible way, but it's not ungenerous or skimpy if you know the angles. And the systemic, structural bureaucracy has no interest in streamlining or making it easier to move out of poverty and once people fall into the system, it's a status thing to know the angles.

It's a well known problem among the homeless (they have trouble assimilating because their built-up knowledge isn't worth anything in the regular economy but is very valuable on the streets), but everyone pretends this isn't basically the case with any other group of disadvantaged people who receive benefits if they work 10 hours a week but get nothing if they work full time unless they can somehow leap from 8$/hr to 20+$/hr.

Bruce King said...

Plummer: The inequality is amazing. We no longer have a middle class. I think about this stuff because I wonder who I'll sell my pigs to.

The biggest thing for me is the 15% capital gains tax vs the much higher tax rates for any sort of income. That alone steers most of the money into the pockets of the rich.

Bruce King said...

So let's work with what you're saying. Free rent, free utilities, free food. Lets say that it all totals about $1000 a month.

That's below the poverty guidelines for a family of 2. And yep, it does take a lot of time and effort to qualify and remain qualified for those programs -- but that's the way its set up.

that's 1/3rd of the average wage in King county washington, which I happen to know off the top of my head. It's no featherbed.

But do you really begrudge putting food in their mouths and a roof over their heads?

solagratiasnohomish said...

No, I begrudge being told 100k/yr in taxes to pay for these programs isn't enough of a 'fair share', while the 1% set up foundations to shelter their money from having to pay for this stuff and still get the joy of spending it.

Considering market rent in the Seattle area is more like 1000/month alone, and SNAP is 300 or so for 2 people and utilities add 300 or so a month (Seattle is full of poor quality rental stock, not least due to regulatory issues), it's more like 1600/month, and that isn't counting the daycare/Head Start, which have a monthly value of about 1300/month.

So we're already at 2900/month in value, or about 35k/yr. That is value of benefits. Throw in babysitting for cash in hand at 200/wk and a waitress job taking 2 shifts at 10 hours a week total (and in WA you earn about 9$/hr plus cash tips) and you have 10k or so off the books and just enough on the books to not trigger the poverty line phaseout.

35k benefits+10k under the table+14k on the books+5k EITC=29k actual cash to spend and 35k paying for your rent, food, utilities, childcare so you can work those two shifts a week.

No, it's not rich, but making almost 30k a year and not having to pay basic bills (or the full taxes) means a much higher living standard than someone who has to actually work 40/50/60 hours a week to make 60k and pay for everything out of the earnings.

For those who pay 50-60% in state, federal, property taxes, it's really not about 'begrudging', it's about just wanting to stop hearing that paying out half or even more than half in taxes isn't good enough and would you pony up some more because, income inequality!

Bruce King said...

You're paying $100k a year in taxes? At current tax rates, that means your income is in the $700k a year range (assuming mostly capital gains taxed at 15%...) That's a great income. Congratulations.

Since you're talking Seattle, I have some hard numbers for you:

Housing assistance: the current waitlist for section 8 housing is more than 2,000 households. they hold a lottery to add you to the waitlist. The lottery just puts you at the end of a line of 2,000 previous applicants. So as far as section 8 housing assistance in Seattle, effectively there is none. So zero that out.

Child care: The city of Seattle does offer subsidized child care, but it's only 25 to 70% of the standard rate, and only at some providers. They have a waitlist too. I'm not clear how much you have to pay, but I'd guess you need more than $1k a month, even at 70% subsidy. Hard to do that on a minimum wage job.

Lets assume that they do have that waitress job at 20 hours a week, and babysit too; 10 hours at $10/hour. That's $300 a week, which.... just about covers the daycare bill. So you don't have anyting left over at the end of the month -- but that's ok because you get $6 a day in food stamps.

That's living pretty large, alright. Working a full time job, two side jobs, and eating at $6/day.

Man. I'm wasting my time farming.

solagratiasnohomish said...

I thought it was pretty clear I was talking about people who were already in the system, not someone who needed help and was stuck navigating the maze with no inside information.

But to touch on some specifics:
Daycare runs about 1300/month for the good stuff, not Kindercare, so the city of Seattle is willing to pay 70% of 1300, which means less than 100/week out of pocket.

You reversed the waitressing and babysitting. It's usually the other way around-- restaurants like workers who don't 'need' lots of shifts, so there are those who work a couple of 5 hour shifts to qualify for EITC. And I would totally agree that this setup is a subsidy to the restaurant, not just the worker.

And since the person isn't working full time, they help out some friends by babysitting for cash in hand, off the record. Those friends aren't paying unemployment, SS/FICA, income tax, etc, or even honestly minimum wage in a lot of cases. But they are getting their own effective subsidized childcare this way at lower rates than that 1300/month for official, licensed, high quality daycare.

And even though I was talking about people already in the system, I will mention that without needing section 8 at all, a lot of broke people sublet illegally for cheap, well under 1k/month.

So in practice, this fictional person is making 200$/week legally (we'll assume 110$ declared tips and 90$ base wage), 300/week illegally (babysitting and unreported tips), pays 100/week for daycare (their share after the subsidy), and gets an annual EITC of 5k. So they earn 500/week, get some money from the other parent of their child (average of 100/week), and sublet illegally for 400/month.

There's income inequality there, but it's clearly very complicated, as multiple levels of people are benefitting from that person making 'only' 20k or so a year. And again, where's your distaste for for-profit companies making a fortune off being the providers of the SNAP cards, the daycare centers that are 'select providers' with the city, the restaurants that preferentially hire people who don't want 'too many' hours, the friends who don't want to pay even minimum wage for childcare?

It's a life that is hard to get out of if you are already in it, because so many people benefit from having a permanent class of people in this state. But that isn't what is discussed when it comes to income inequality.

As for your 700k, a person could be paying 100k in federal, property and state/local taxes on salary, as is not uncommon in the 20%, which is full of people who make a lot in salary (often with two incomes, not one), but end up paying 50%+ (not 100k necessarily) on quite a bit less than 700k.

plummerj said...

I'm always amazed at how conversations go on the topic of inequality. My reaction is: this is terrible, we must do something about it. It's ruining the country. But others go right to the idea"the poor are not really as bad off as you say, they have all these government programs." I don't know if government programs are counted or not, but to me the essential point is that they are still dirt poor. The bottom quintile has nothing compared to everyone else, and especially compared to the incredible wealth of the top one percent. Meg whitman could throw 45 million into a campaign for Governor of California; Romney supposedly earns $50,000 dollars a day. This incredible wealth was generated by manipulating finance, lowering wages, and shipping manufacturing off to China. Why do we focus on the petty schemes of the poor?

solagratiasnohomish said...

plummerj, those government programs are paid for disproportionately by the income taxes of people making 75k-250k in salary or small business income. The 1% is a sideshow, they aren't the ones who get hit when the siren song of higher taxes comes around. It's people making decent livings, but who are very far from wealthy themselves.

There are talks right now to seize 401ks, but not remove the carried-interest exemption that benefits Mitt Romney and like 100 other rich people. No, they want the 401k money, that comes from people making wages.

It's class warfare against the modest earners, fomented by the 1% types.

Bruce King said...

Sola, it does bother me that roughly half the people in the country pay no federal taxes; at face value, that seems unfair. In fact, I actually support a sales tax because it's often the ONLY tax of any sort that a big percentage of the population pays -- and I like the idea of everyone contributing.

The last time that income inequality hit these levels was around the turn of the century, and in the next decades all sorts of things made wages and conditions better for the lower class (which in this case is 70% of the population!).

Is $250k a year income from investments worth taxing, but $250k a year in income from a small business not?

Virtually everything you touch is subsidized by low labor rates; from the food you eat to the clothes you wear.

solagratiasnohomish said...

There is a wider gulf between Mitt Romney and, well, the rest of us than there is between the poor person making 20-30k a year and the hospital administrator making 90k while their spouse makes 45k.

I have sympathy for both groups of people, not just the 20kers, as the 100kers are not exactly far from them when it comes down to it.

Taxes should be simpler, lower and flatter, with some sumptuary laws.

That would get everyone more actual money to spend, especially at the lower end. Yes, regulators and the taxation army would have to find something else to do, but it would be a small price to pay.

Hostetter said...

Maybe this is a bit off topic but I believe that this country is going the way of the South American countries. If you have ever been there it is distinctly divided by wealth and the military is as powerful or more so than their federal Governments. If I ever find my 40 acres I want to raise my own pigs because I probably wont be able to afford yours.