I can't help but think the additional revenue of these repairs helps to keep prices down to some extent, and I have little doubt that repair revenue is what keeps many dealers in business
Indeed, I've heard there's a saying in the industry: The back pays for the front.
Fortunately, dealers in surrounding states might then demand a similar law for their states to keep people from buying their cars in Massachusetts. Perhaps this rule would just grow like kudzu from there!
Maybe you should read my post - maybe you would have noticed that I specifically mentioned government assistance programs (Medicaid and Food Stamps) for those who need help and was not critical of them.
But, I understand, flaming is probably easier than actually reading or thinking critically.
Food is also necessary for survival - but the government only provides it to those who are unable to provide it to themselves -- and then doesn't provide Prime cuts of steak.
Why should health care be any different? Roughly speaking - Food Stamps:Nutrition::Medicaid:Health Care.
Also, you mentioned that "premium" treatments should be charged "at full rate" and gave some examples. I'm curious, do you accept, for example, that spending $200K to extend the life of a terminally ill patient from a statistical six months to seven months would be a "premium" treatment?
It seems that government provided care for the needy could fairly easily be capped by "Provide no treatments that weren't available or wouldn't have commonly been provided 30 years ago unless a newer alternative is cheaper and is statistically no less successful". This would mean that often only generic drugs would be available and that, today, certain expensive (by today's standards) tests (such as PET, MRI, and most CTs) would be unavailable on the government's dime. It wasn't barbaric that the richest people 30 years ago couldn't get access to things that weren't yet invented, why would it be inappropriate to limit free access to these "prime steak" services today? This would keep costs down while not impacting R&D and innovation in pharmaceutical and medical equipment development. Note that many advancements of the last 30 years would be available via the "cheaper" escape clause (such as a surgery that is now commonly done laparoscopically on an outpatient basis rather than via a more invasive procedure which required a multi-day hospital stay).
Hmm... interesting thought... but, could a surface that reflects that many photons on the first interaction actually "capture" an interesting number of reflected photons? Seems like most reflected photons would never again interact with the collector and those that did would mostly, again, be reflected. Of course, nanotech might change this thinking if I thought about it more:)
not to mention the increase in surface area due to texture
It doesn't seem to make sense that a texture would help. The number of photons from the sun that hit a square meter isn't affected by the texture of that square meter. When the sun dispatches a photon, I don't think it analyzes if it's going to hit a textured surface and instead sends two photons.
It may be that some materials are unable to process all the photons hitting a square meter of material so increasing the surface area with ridges or something may help keep the footprint of the panel down by processing a larger number of photons - but probably increases the material cost also.
For a very coarse "texture", more of the photons that hit at an angle may be processed in some materials if the angle of incident affects absorption. However, when the photons are hitting at 90%, this same texture would reduce the efficiency. This may be a good trade off in some case as "high noon" efficiency may not be as important as early morning and late night efficiency and the textured surface may eliminate the need for panels that track the sun.
Sorry, I assumed everyone knew that the USSR predated WWII so thought my intent was obvious, but obviously I failed to communicate.
What I meant was that the events of WWII led to the USSR as it existed at the termination of WWII. There are any number of alternative outcomes of WWII that could have resulted in the USSR being much more, or much less, powerful than they ended up being at the end of WWII. The degree of power they emerged from WWII with was what led to the Cold War.
Hmm.... The outcome of WWII led to the USSR, which in turn led to the Cold War, which in turn lead to the space race, which in turn contributed to a massive focus on science and technology in the US -- yielding DARPA and the internet. So, without WWII, who knows how we would be communicating right now - perhaps on an old rotary dial phone, perhaps via snail mail, or perhaps via something far advanced beyond what we can even imagine. But, it's pretty safe to say that we would not be communicating on something called Slashdot.
Needless to say, not communicating on/. would be among the least significant differences between your life with WWII vs. without WWII.
Boy, are you going to be shocked when the inflation rate in the USA surpasses that of 1980 (that would be almost 14% per annum - but that happened so long ago that it can't be important).
Likely the "sucker(s)" would not be the same vessel(s) as the "transporter(s)". The "suckers" would likely be much smaller and have a bunch of specialized equipment on them and would offload the plastic bits to the "transporters". Probably the "transporters" could be quite a variety of ships - perhaps ones that are obsolete for their originally intended use (any single wall oil tankers left that weren't salvaged for their steel during the boom times?).
Seems that HFT could be curbed substantially just be requiring that orders can't be canceled until a few (maybe 30) seconds after entry except in the case of error in which case a cancellation fee (perhaps 0.5% of the order price or current value of the stock for market orders) would be charged. Putting a draconian mandatory ownership period on the order of hours would be very disruptive and unnecessary.
Thanks - the article you referenced is quite interesting.
However, I don't think it supports the GP's position very well.
The GP claims that there is "almost NO SOCIAL MOBILITY in the US" while this article actually shows quite a bit (more than I expected) -- just not as much as some people seem to have thought. Oddly, I never had the fantasy view of the "easy mobility" myth that the WSJ article is debunking. For an extreme example, I've always assumed that the seven children of a unmarried, unemployed, functionally illiterate, drug addicted mother who dropped out of high school to have her first kid when she was 15 years old are much less likely to be successful than the two children of a married, stable couple where each have advanced degrees from top colleges in engineering or business and are executives at successful companies. Bad and unmotivated parenting does have its unfortunate victims.
The GP also claims that "The wealth the average American accumulates in their lifetime is INSIGNIFICANT compared to the wealth that is INHERITED". This article doesn't even touch on conventional wealth (assets such as property, securities, cash) - inherited or otherwise. Indeed it focuses mostly on wage levels.
The chart on page 3 (and some later references) suggests a lot more mobility than I expected and I am heartened by this. The title, Family Fortunes seems misleading -- this chart is about pay scales not wealth. With a very quick search I didn't find the exact study this chart was derived from so I'm not completely sure what these numbers mean. For example, it's not completely clear if "pay scale" is hourly pay level or, for example, total annual earnings (so someone working two jobs or a lot of overtime would be "higher" than someone making more money per hour but working less hours), but that's probably not critical to know and I assume it's actually hourly wage level. If a father was in the bottom quartile of pay scale (i.e., he earned less per hour than 75% of the wage earners), his son has about a 1/3 chance of rising to the third or fourth quartile of pay scale. That's remarkable -- one in three sons jumps from the BOTTOM quartile of pay scale into the top two quartiles while random assignment of pay scales to sons would result in 1/2 of the sons being in the top two quartiles - and random assignment would be equivalent to "perfect mobility". Put another way - for every six sons of a lowest quartile wage earner father, 2 jump more than one quartile above their father -- if there was "perfect mobility", only one more son would do so. This is VERY good!
I agree with the article's observations about the increasing importance of education for "success" in our technological society. This is why I've been a strong advocate of things such as school vouchers (and, to a lesser extent, charter schools) for over 20 years. The public system should be required to compete with other ideas and concepts and children of poor parents should not be forced to be subjected to the "lowest common denominator" education model that many public schools foist on these children.
[Tangent: It's interesting that those who support the "public option" for health care insurance reform do so because they believe that private profit oriented insurers should be forced to compete with non-profit, government backed, insurance. But, it seems that most who support this approach for health insurance seem fearful of making non-profit, government backed public education compete with private enterprises. And the inverse also seems to be the case. Curious indeed...]
Unfortunately, I'm not inclined to spend $ to find out what Summer's assumptions are. Abstracts are pretty meaningless without the data and methodology. You represent this paper as being from the "White House Economic Council" (I assume you meant "National Economic Council" (NEC) - an agency in the Administration), but it seems to be from the "National Bureau of Economic Research" (NBER) - a private non-profit organization. While it's true that Summers was appointed Director of the NEC in January 2009, this paper was published in 1981 (when Summers appears to have been a graduate student).
Does the author maintain that individual Americans who are in the Rothschild or Rockefeller families are worth more than $1.3B (and therefore were incorrectly omitted from the "Forbes US 400 richest" list except for David Rockefeller Sr who is on the list at $2.2B)? I know there is quite a bit of debate on the wealth of the various Rockefellers - but what assumptions did Summers make and why is his estimate better than Forbes' estimate about 30 years later?
I suppose it's possible that the richest few hundred people in the US are largely "self made" and the next few tens of thousands are largely "trust fund" babies. That would seem a bit odd to me because trust fund babies seem to use up the money fairly quickly if they have control of it unless they are good at growing it -- and don't end up with much wealth after a couple generations.
I also used the FORBES 400 list of Americans, not just the top 20 (note that I also looked at about the bottom 25 on that list also). Forbes isn't always right on their estimates, but they seem to do a pretty good job in most cases. I suspect that many Rothschild who descended from the generation that made the big bucks in the early 1800's aren't "Americans" (some certainly are though).
You refer to the "average American". Unfortunately in this context I'm not sure I know what this means (since each individual is not an average - just as the "average American" doesn't really have 2.1 kids - in fact, no American has 2.1 kids).
Are you are referring to "most Americans"? I.e., in the group of Americans who died today (marking the end of their lifetime and initiating the accounting) more than 1/2 of them have more inherited wealth than accumulated (presumably you mean "non-inherited") wealth. I find this very doubtful. If true, it would be an odd world -- assuming inheritance is eventually passed on to direct descendants (of course this is not completely true, but it seems like a good first approximation) over 1/2 the parents leave more to their children than their children manage to accumulate and this repeats generation over generation? That's pretty impressive actually - this would suggest that the "average American" is so well off that they don't even need to dip into inherited money even though it's more than what they accumulate independently in their lifetime and is certainly an indication that 1/2 or more of the people have more money than they need.
Maybe you mean the aggregate accumulated wealth of Americans who die on the average day is insignificant compared to the aggregate inherited wealth among those people? I find this doubtful, but can't really prove it as it's not as obviously absurd a conclusion. If we look at the richest Americans in 2008 according to Forbes, the richest 17 (with net worth > $15B) are:
William Gates III
Warren Buffett
Lawrence Ellison
Jim Walton
S Robson Walton
Alice Walton
Christy Walton & Family
Michael Bloomberg
Charles Koch
David Koch
Michael Dell
Paul Allen
Sergey Brin
Larry Page
Sheldon Adelson
Steven Ballmer
Abigail Johnson
Most readers will instantly recognize most of the names on the list and be aware of the source of the wealth of over 1/2 of them. Looking through this list, the four Waltons wealth is probably mostly "inherited" (first generation). The Kochs one can debate about - they inherited the family business which, based on a transaction in which Charles and David bought out the other two brothers' interests for $1.1B in 1983, was probably worth $2.2B in 1983 -- but Charles and David are now worth (collectively) $38B - so probably about $33B of this is "self made" (adjusting the guesstimate of 1983 value into 2008 dollars). Abigail Johnson is a bit hard to tell, but it looks like mostly "inherited" (first generation) but she is actively involved in day to day work at the family company - Fidelity Investments. I think all the others are self made rather than inherited. Working on these assumptions, the net worth of these 17 people is cumulatively about $395B - 29% inherited, 71% "accumulated". So, for the wealthiest 17 people in America, their aggregate inherited wealth seems to be swamped by their accumulated wealth. Note also that these 17 people possess about 25% of the net worth of the top 400 richest Americans. The 400th richest American is worth only $1.3B - about 25 people tie for this $1.3B of wealth and a quick skim indicates that the vast majority of these people accumulated (i.e., through investments and/or building/growing a company they had a stake in) rather than inherited their wealth.
Also, one needs to be careful with statistics about inherited vs. accumulated wealth... Consider a married couple in a community property state (such as California) who have been married to each other through their entire "earning" life. Each spouse owns 1/2 the assets and is free to leave them to whoever they want (some exceptions for things like 401(k)s). Usually one dies befor
But the property tax is independent of your INVESTMENT GAIN in your house. If you sell your house, and have a gain over $250K (for a single person) you will have to pay tax on the gain. Why not pay tax as you go - why should I pay the tax because I have to move for job reasons but someone who stays put doesn't have to pay it until much later?
Yep - Prop 13 is a mess and needs fixing. It was, in part, a "simple" response to the impact the excessive spending habits of California politicians were having on older folks in times of rising real estate values. I think, however, that the mess would still exist without Prop 13, just in a different form, because Californians seem to like to vote for new spending and politicians who will implement more programs -- well, at least until the last election. Since the cost of living (and hence, goods and services) in an area is only partially impacted by property values, it seems property tax increases overall should be based on COLA and property size, occupancy, and description rather than on it's current value.
It's amazing -- California just recently voted for high speed rail bonds. But apparently it never occurred to the folks in some of the rich communities that the rail would actually go through their town elevated above the existing rail-line - now cities whose people voted FOR the proposal are threatening lawsuits. I guess being rich doesn't require reading skills.
You probably pay tax on the value of your home regardless of how much "gain" you have in it (some places like California twist this due to Prop 13 - but the same basic situation applies and I'll ignore the Prop 13 issue since it's not nationwide). If I buy a $1M home for cash today and you bought the same house next door thirty years ago for $100K, we will both pay the same property tax. However, you have a $900K gain in your house while I don't - playing devils advocate here, why shouldn't you pay that gain as capital gains as it occurs (I don't think so)? Should you pay it if you sell your house and buy mine (I don't think so)? However, I don't see why if I buy Oracle stock and it goes up, why I should be taxed on the gain when I move some of it into Sun? Oracle's purchase of Sun is going to be tax free to Sun shareholders - how is that different than me voluntarily shifting to a better (NOT) investment? The current tax code discourages innovation and fluid movement of capital to best use due to the act of shifting investments being a taxable event.
A wealth tax would cause great uproar (and would be, I think, a bad idea).
I favor consumption taxes with few exemptions except for rebates of a fixed amount per person/family to address the regressive nature of such taxes on the very poor. You really don't get to enjoy your wealth until you spend it - otherwise your money is going to good use somewhere else providing jobs or funding R&D or whatever (I suppose you could put it in a vault, but few people do that).
As I mentioned elsewhere, there's something about Warren's claim that doesn't make a lot of sense. Perhaps there's just too little detail.
Using 2006 Federal income tax schedules (I assume he was referring to 2006 rates as he made the claim in 2007), an individual whose annual taxable income was between $60,000 and $60,050 would owe $11,564 in Federal Income Tax. Note that most people have some deductions (at least a personal deduction for themselves) so taxable income is (I think) nearly always less than "sum of hourly wage income". Note that 11,564/60,000 gives us an effective overall Federal tax rate of at most 19% - not the 30% Warren claims. Even the marginal Federal Income Tax rate in her income range was only 25% - again less than 30%.
So, maybe he or she was including state and local taxes and they are actually taxed in different localities (or, his beef is with state/local taxes). Perhaps she has outside income he's not aware of or accounting for. Perhaps he was including property taxes on homes and his receptionist has been with the company for a long time and purchased/was given in an option plan a few shares of BRK.A a zillion years ago and she cashed them in to buy a mansion for cash a few years ago - and now she has to pay property tax on on a multimillion dollar place while Warren is, I think, still living in the modest middle class house he's lived in for much of his adult life.
What is clear, the numbers may not mean quite what they seem.
In common usage the term "income tax" includes capital gains tax. Note that IRS Form 1040 states at the top in big bold letters "1040 U.S. Individual Income Tax Return" - and Schedule D (Capital Gains) is a schedule within Form 1040 and carries over to the main 1040 (into line 13).
Also, the stats I referenced in my earlier post included such income.
As far as Buffet's claim. I don't think he's lying, but until I see his tax return, I can only speculate. The definition of "loophole" varies widely - was the oil depletion allowance a loophole - many oil folks would have said "no" while most individual taxpayers would have said "yes". Is some kind of preferential treatment for investing in solar power a "loophole"? I would say so, others would disagree. It would be fascinating to see Buffet's income tax return (not that I think I have any "right" to).
Umm... Warren and Bill pay income taxes on their realized investment gains -- just like you and I do. Investments don't buy planes, yachts, and country mansions - realized gains do, and that's what is generally taxed.
It's true that they only pay it when the gain is realized - which seems appropriate - seriously, would you want a tax on your home every year just because it went up in value even though you hadn't sold it? However, investors often pay taxes when they just reallocate assets - say by selling $100M in MSFT to invest $100M in Tesla - that seems wrong, it's just a shift of assets (obviously the total basis in the Tesla stock should be the same as the MSFT stock was - gotta pay the piper sometime).
As far as estate taxes, I agree that the step up in basis is nonsense and should be eliminated.
News alert... The wealthy in the US already pay a lot of income taxes as the system is highly progressive. Looking at 2005 personal income tax statistics (the last year I pulled numbers for although I believe the IRS recently released newer numbers), 39% of the total personal income taxes came from top 1% (by count, not by total income) of the tax returns and 60% of the total personal income tax comes from the top 5% of the tax returns while only 3% of the income tax revenue comes from the bottom 50% of the returns (yep, that's right, basically, the bottom 50% of the returns result in virtually no income tax revenue).
If the wealthy are against a VAT (and I've not seen a poll indicating this is the case), it's more likely to be because they fear that it would drag the economy down by discouraging consumer spending. Since the wealthy typically are investors, this reduction in economic activity would cost them far more than a VAT. Since a VAT is far more regressive than the US personal income tax structure, shifting to a VAT would actually benefit wealthy folks in terms of how much tax they paid (assuming, of course, that the government didn't just increase spending to use all the extra tax revenue -- which, of course, is probably a faulty assumption).
Also, don't forget that a lot of states have a sales tax already - so that would, presumably, be on top of a VAT (for example, in two cities in California, Pico Rivera and South Gate, sales tax rates are 10.75%).
Many don't remember.. but back in the eighties it was the norm NOT to have to contribute to your health plan and I wish I could get that kind of coverage now, but even the most expensive plan that most places offer, don't touch what I had, and have high deductibles to boot.. our system is broken...
True... but your health care plan of the 80's wouldn't have paid for things like PET scans, many MRIs, Monoclonal Antibodies for cancer therapy, proton beam radiotherapy or many other expensive things that the plans that require employee contributions do cover. Of course, that's because these expensive medical treatments were either completely unavailable or so limited in supply as to limit access.
Application of expensive medical technology has increased dramatically in the past 30 years - we can argue if all of it (such as the proton beam example or the number of MRIs done) are cost effective or even helpful, but patients rarely reject them (esp. things like MRIs that have no long term side effects). It's not surprising that as the array of expensive services expected and demanded by patients has risen that workers might end up picking up more of the bill.
Interesting point... But, I don't think most people who took advantage of CARS were in the market for used cars under $8K and, mostly, they would be able, or nearly able, to buy a new car with or without CARS. I don't see that a $5K used car will suddenly be within reach of the $1500 budget student/poor person because of CARS. I suspect the slide you speak of, while real, would not come close to offsetting the depletion of $1K-$3K cars on the used market. (But then, I'm a software guy, not a microecon guy).
The "building new car and scrapping old one" energy costs as well as the benefits of the improved MPG of the new car need to be amortized over the car's life. If a car would typically last 200K miles and it's scrapped prematurely under CARS at 100K miles, basically during the owner's lifetime an additional 1/2 a new car will need to be built and an additional 1/2 of an old car scrapped. Similarly, the benefit of the MPG increase is only for the remaining life of the old car. (For simplicity, I'm ignoring the energy costs related to repairing the older car in it's last 100K miles - I assume these are minor compared to the original manufacturing energy costs).
On the other hand, since new car MPG will continue to rise, this program has a (hopefully smaller) delayed bubble effect in a few years. The cars being purchased "early" under the program will be on the road for a while - say 15 years - while the cars being junked might have stayed on the road for another five years and then be replaced with a car that probably gets better mileage than the prematurely purchased car does. Thus, ten years from now, the average MPG of cars on the road will likely be lower than if CARS had never existed. Hopefully the increase of the average MPG of cars on the road between than and now due to CARS will more than offset this.
All I know is, I wouldn't want to be a college student or poor person (is that redundant?) trying to buy a $1500 beater right now:(
Slashdot Mirror
Indeed, I've heard there's a saying in the industry: The back pays for the front.
Fortunately, dealers in surrounding states might then demand a similar law for their states to keep people from buying their cars in Massachusetts. Perhaps this rule would just grow like kudzu from there!
Maybe you should read my post - maybe you would have noticed that I specifically mentioned government assistance programs (Medicaid and Food Stamps) for those who need help and was not critical of them.
But, I understand, flaming is probably easier than actually reading or thinking critically.
Food is also necessary for survival - but the government only provides it to those who are unable to provide it to themselves -- and then doesn't provide Prime cuts of steak.
Why should health care be any different? Roughly speaking - Food Stamps:Nutrition::Medicaid:Health Care.
Also, you mentioned that "premium" treatments should be charged "at full rate" and gave some examples. I'm curious, do you accept, for example, that spending $200K to extend the life of a terminally ill patient from a statistical six months to seven months would be a "premium" treatment?
It seems that government provided care for the needy could fairly easily be capped by "Provide no treatments that weren't available or wouldn't have commonly been provided 30 years ago unless a newer alternative is cheaper and is statistically no less successful". This would mean that often only generic drugs would be available and that, today, certain expensive (by today's standards) tests (such as PET, MRI, and most CTs) would be unavailable on the government's dime. It wasn't barbaric that the richest people 30 years ago couldn't get access to things that weren't yet invented, why would it be inappropriate to limit free access to these "prime steak" services today? This would keep costs down while not impacting R&D and innovation in pharmaceutical and medical equipment development. Note that many advancements of the last 30 years would be available via the "cheaper" escape clause (such as a surgery that is now commonly done laparoscopically on an outpatient basis rather than via a more invasive procedure which required a multi-day hospital stay).
Hmm... interesting thought... but, could a surface that reflects that many photons on the first interaction actually "capture" an interesting number of reflected photons? Seems like most reflected photons would never again interact with the collector and those that did would mostly, again, be reflected. Of course, nanotech might change this thinking if I thought about it more :)
It doesn't seem to make sense that a texture would help. The number of photons from the sun that hit a square meter isn't affected by the texture of that square meter. When the sun dispatches a photon, I don't think it analyzes if it's going to hit a textured surface and instead sends two photons.
It may be that some materials are unable to process all the photons hitting a square meter of material so increasing the surface area with ridges or something may help keep the footprint of the panel down by processing a larger number of photons - but probably increases the material cost also.
For a very coarse "texture", more of the photons that hit at an angle may be processed in some materials if the angle of incident affects absorption. However, when the photons are hitting at 90%, this same texture would reduce the efficiency. This may be a good trade off in some case as "high noon" efficiency may not be as important as early morning and late night efficiency and the textured surface may eliminate the need for panels that track the sun.
Thank you for playing, but nope - there will be insufficient tax revenue to provide those to your kids.
Sorry, I assumed everyone knew that the USSR predated WWII so thought my intent was obvious, but obviously I failed to communicate.
What I meant was that the events of WWII led to the USSR as it existed at the termination of WWII. There are any number of alternative outcomes of WWII that could have resulted in the USSR being much more, or much less, powerful than they ended up being at the end of WWII. The degree of power they emerged from WWII with was what led to the Cold War.
Hmm.... The outcome of WWII led to the USSR, which in turn led to the Cold War, which in turn lead to the space race, which in turn contributed to a massive focus on science and technology in the US -- yielding DARPA and the internet. So, without WWII, who knows how we would be communicating right now - perhaps on an old rotary dial phone, perhaps via snail mail, or perhaps via something far advanced beyond what we can even imagine. But, it's pretty safe to say that we would not be communicating on something called Slashdot.
/. would be among the least significant differences between your life with WWII vs. without WWII.
Needless to say, not communicating on
Boy, are you going to be shocked when the inflation rate in the USA surpasses that of 1980 (that would be almost 14% per annum - but that happened so long ago that it can't be important).
Likely the "sucker(s)" would not be the same vessel(s) as the "transporter(s)". The "suckers" would likely be much smaller and have a bunch of specialized equipment on them and would offload the plastic bits to the "transporters". Probably the "transporters" could be quite a variety of ships - perhaps ones that are obsolete for their originally intended use (any single wall oil tankers left that weren't salvaged for their steel during the boom times?).
Seems that HFT could be curbed substantially just be requiring that orders can't be canceled until a few (maybe 30) seconds after entry except in the case of error in which case a cancellation fee (perhaps 0.5% of the order price or current value of the stock for market orders) would be charged. Putting a draconian mandatory ownership period on the order of hours would be very disruptive and unnecessary.
Thanks - the article you referenced is quite interesting.
However, I don't think it supports the GP's position very well.
The GP claims that there is "almost NO SOCIAL MOBILITY in the US" while this article actually shows quite a bit (more than I expected) -- just not as much as some people seem to have thought. Oddly, I never had the fantasy view of the "easy mobility" myth that the WSJ article is debunking. For an extreme example, I've always assumed that the seven children of a unmarried, unemployed, functionally illiterate, drug addicted mother who dropped out of high school to have her first kid when she was 15 years old are much less likely to be successful than the two children of a married, stable couple where each have advanced degrees from top colleges in engineering or business and are executives at successful companies. Bad and unmotivated parenting does have its unfortunate victims.
The GP also claims that "The wealth the average American accumulates in their lifetime is INSIGNIFICANT compared to the wealth that is INHERITED". This article doesn't even touch on conventional wealth (assets such as property, securities, cash) - inherited or otherwise. Indeed it focuses mostly on wage levels.
The chart on page 3 (and some later references) suggests a lot more mobility than I expected and I am heartened by this. The title, Family Fortunes seems misleading -- this chart is about pay scales not wealth. With a very quick search I didn't find the exact study this chart was derived from so I'm not completely sure what these numbers mean. For example, it's not completely clear if "pay scale" is hourly pay level or, for example, total annual earnings (so someone working two jobs or a lot of overtime would be "higher" than someone making more money per hour but working less hours), but that's probably not critical to know and I assume it's actually hourly wage level. If a father was in the bottom quartile of pay scale (i.e., he earned less per hour than 75% of the wage earners), his son has about a 1/3 chance of rising to the third or fourth quartile of pay scale. That's remarkable -- one in three sons jumps from the BOTTOM quartile of pay scale into the top two quartiles while random assignment of pay scales to sons would result in 1/2 of the sons being in the top two quartiles - and random assignment would be equivalent to "perfect mobility". Put another way - for every six sons of a lowest quartile wage earner father, 2 jump more than one quartile above their father -- if there was "perfect mobility", only one more son would do so. This is VERY good!
I agree with the article's observations about the increasing importance of education for "success" in our technological society. This is why I've been a strong advocate of things such as school vouchers (and, to a lesser extent, charter schools) for over 20 years. The public system should be required to compete with other ideas and concepts and children of poor parents should not be forced to be subjected to the "lowest common denominator" education model that many public schools foist on these children.
[Tangent: It's interesting that those who support the "public option" for health care insurance reform do so because they believe that private profit oriented insurers should be forced to compete with non-profit, government backed, insurance. But, it seems that most who support this approach for health insurance seem fearful of making non-profit, government backed public education compete with private enterprises. And the inverse also seems to be the case. Curious indeed...]
Unfortunately, I'm not inclined to spend $ to find out what Summer's assumptions are. Abstracts are pretty meaningless without the data and methodology. You represent this paper as being from the "White House Economic Council" (I assume you meant "National Economic Council" (NEC) - an agency in the Administration), but it seems to be from the "National Bureau of Economic Research" (NBER) - a private non-profit organization. While it's true that Summers was appointed Director of the NEC in January 2009, this paper was published in 1981 (when Summers appears to have been a graduate student).
Does the author maintain that individual Americans who are in the Rothschild or Rockefeller families are worth more than $1.3B (and therefore were incorrectly omitted from the "Forbes US 400 richest" list except for David Rockefeller Sr who is on the list at $2.2B)? I know there is quite a bit of debate on the wealth of the various Rockefellers - but what assumptions did Summers make and why is his estimate better than Forbes' estimate about 30 years later?
I suppose it's possible that the richest few hundred people in the US are largely "self made" and the next few tens of thousands are largely "trust fund" babies. That would seem a bit odd to me because trust fund babies seem to use up the money fairly quickly if they have control of it unless they are good at growing it -- and don't end up with much wealth after a couple generations.
I also used the FORBES 400 list of Americans, not just the top 20 (note that I also looked at about the bottom 25 on that list also). Forbes isn't always right on their estimates, but they seem to do a pretty good job in most cases. I suspect that many Rothschild who descended from the generation that made the big bucks in the early 1800's aren't "Americans" (some certainly are though).
You refer to the "average American". Unfortunately in this context I'm not sure I know what this means (since each individual is not an average - just as the "average American" doesn't really have 2.1 kids - in fact, no American has 2.1 kids).
Are you are referring to "most Americans"? I.e., in the group of Americans who died today (marking the end of their lifetime and initiating the accounting) more than 1/2 of them have more inherited wealth than accumulated (presumably you mean "non-inherited") wealth. I find this very doubtful. If true, it would be an odd world -- assuming inheritance is eventually passed on to direct descendants (of course this is not completely true, but it seems like a good first approximation) over 1/2 the parents leave more to their children than their children manage to accumulate and this repeats generation over generation? That's pretty impressive actually - this would suggest that the "average American" is so well off that they don't even need to dip into inherited money even though it's more than what they accumulate independently in their lifetime and is certainly an indication that 1/2 or more of the people have more money than they need.
Maybe you mean the aggregate accumulated wealth of Americans who die on the average day is insignificant compared to the aggregate inherited wealth among those people? I find this doubtful, but can't really prove it as it's not as obviously absurd a conclusion. If we look at the richest Americans in 2008 according to Forbes, the richest 17 (with net worth > $15B) are:
Most readers will instantly recognize most of the names on the list and be aware of the source of the wealth of over 1/2 of them. Looking through this list, the four Waltons wealth is probably mostly "inherited" (first generation). The Kochs one can debate about - they inherited the family business which, based on a transaction in which Charles and David bought out the other two brothers' interests for $1.1B in 1983, was probably worth $2.2B in 1983 -- but Charles and David are now worth (collectively) $38B - so probably about $33B of this is "self made" (adjusting the guesstimate of 1983 value into 2008 dollars). Abigail Johnson is a bit hard to tell, but it looks like mostly "inherited" (first generation) but she is actively involved in day to day work at the family company - Fidelity Investments. I think all the others are self made rather than inherited. Working on these assumptions, the net worth of these 17 people is cumulatively about $395B - 29% inherited, 71% "accumulated". So, for the wealthiest 17 people in America, their aggregate inherited wealth seems to be swamped by their accumulated wealth. Note also that these 17 people possess about 25% of the net worth of the top 400 richest Americans. The 400th richest American is worth only $1.3B - about 25 people tie for this $1.3B of wealth and a quick skim indicates that the vast majority of these people accumulated (i.e., through investments and/or building/growing a company they had a stake in) rather than inherited their wealth.
Also, one needs to be careful with statistics about inherited vs. accumulated wealth... Consider a married couple in a community property state (such as California) who have been married to each other through their entire "earning" life. Each spouse owns 1/2 the assets and is free to leave them to whoever they want (some exceptions for things like 401(k)s). Usually one dies befor
But the property tax is independent of your INVESTMENT GAIN in your house. If you sell your house, and have a gain over $250K (for a single person) you will have to pay tax on the gain. Why not pay tax as you go - why should I pay the tax because I have to move for job reasons but someone who stays put doesn't have to pay it until much later?
Yep - Prop 13 is a mess and needs fixing. It was, in part, a "simple" response to the impact the excessive spending habits of California politicians were having on older folks in times of rising real estate values. I think, however, that the mess would still exist without Prop 13, just in a different form, because Californians seem to like to vote for new spending and politicians who will implement more programs -- well, at least until the last election. Since the cost of living (and hence, goods and services) in an area is only partially impacted by property values, it seems property tax increases overall should be based on COLA and property size, occupancy, and description rather than on it's current value.
It's amazing -- California just recently voted for high speed rail bonds. But apparently it never occurred to the folks in some of the rich communities that the rail would actually go through their town elevated above the existing rail-line - now cities whose people voted FOR the proposal are threatening lawsuits. I guess being rich doesn't require reading skills.
You probably pay tax on the value of your home regardless of how much "gain" you have in it (some places like California twist this due to Prop 13 - but the same basic situation applies and I'll ignore the Prop 13 issue since it's not nationwide). If I buy a $1M home for cash today and you bought the same house next door thirty years ago for $100K, we will both pay the same property tax. However, you have a $900K gain in your house while I don't - playing devils advocate here, why shouldn't you pay that gain as capital gains as it occurs (I don't think so)? Should you pay it if you sell your house and buy mine (I don't think so)? However, I don't see why if I buy Oracle stock and it goes up, why I should be taxed on the gain when I move some of it into Sun? Oracle's purchase of Sun is going to be tax free to Sun shareholders - how is that different than me voluntarily shifting to a better (NOT) investment? The current tax code discourages innovation and fluid movement of capital to best use due to the act of shifting investments being a taxable event.
A wealth tax would cause great uproar (and would be, I think, a bad idea).
I favor consumption taxes with few exemptions except for rebates of a fixed amount per person/family to address the regressive nature of such taxes on the very poor. You really don't get to enjoy your wealth until you spend it - otherwise your money is going to good use somewhere else providing jobs or funding R&D or whatever (I suppose you could put it in a vault, but few people do that).
As I mentioned elsewhere, there's something about Warren's claim that doesn't make a lot of sense. Perhaps there's just too little detail.
Using 2006 Federal income tax schedules (I assume he was referring to 2006 rates as he made the claim in 2007), an individual whose annual taxable income was between $60,000 and $60,050 would owe $11,564 in Federal Income Tax. Note that most people have some deductions (at least a personal deduction for themselves) so taxable income is (I think) nearly always less than "sum of hourly wage income". Note that 11,564/60,000 gives us an effective overall Federal tax rate of at most 19% - not the 30% Warren claims. Even the marginal Federal Income Tax rate in her income range was only 25% - again less than 30%.
So, maybe he or she was including state and local taxes and they are actually taxed in different localities (or, his beef is with state/local taxes). Perhaps she has outside income he's not aware of or accounting for. Perhaps he was including property taxes on homes and his receptionist has been with the company for a long time and purchased/was given in an option plan a few shares of BRK.A a zillion years ago and she cashed them in to buy a mansion for cash a few years ago - and now she has to pay property tax on on a multimillion dollar place while Warren is, I think, still living in the modest middle class house he's lived in for much of his adult life.
What is clear, the numbers may not mean quite what they seem.
In common usage the term "income tax" includes capital gains tax. Note that IRS Form 1040 states at the top in big bold letters "1040 U.S. Individual Income Tax Return" - and Schedule D (Capital Gains) is a schedule within Form 1040 and carries over to the main 1040 (into line 13).
Also, the stats I referenced in my earlier post included such income.
As far as Buffet's claim. I don't think he's lying, but until I see his tax return, I can only speculate. The definition of "loophole" varies widely - was the oil depletion allowance a loophole - many oil folks would have said "no" while most individual taxpayers would have said "yes". Is some kind of preferential treatment for investing in solar power a "loophole"? I would say so, others would disagree. It would be fascinating to see Buffet's income tax return (not that I think I have any "right" to).
Umm... Warren and Bill pay income taxes on their realized investment gains -- just like you and I do. Investments don't buy planes, yachts, and country mansions - realized gains do, and that's what is generally taxed.
It's true that they only pay it when the gain is realized - which seems appropriate - seriously, would you want a tax on your home every year just because it went up in value even though you hadn't sold it? However, investors often pay taxes when they just reallocate assets - say by selling $100M in MSFT to invest $100M in Tesla - that seems wrong, it's just a shift of assets (obviously the total basis in the Tesla stock should be the same as the MSFT stock was - gotta pay the piper sometime).
As far as estate taxes, I agree that the step up in basis is nonsense and should be eliminated.
News alert... The wealthy in the US already pay a lot of income taxes as the system is highly progressive. Looking at 2005 personal income tax statistics (the last year I pulled numbers for although I believe the IRS recently released newer numbers), 39% of the total personal income taxes came from top 1% (by count, not by total income) of the tax returns and 60% of the total personal income tax comes from the top 5% of the tax returns while only 3% of the income tax revenue comes from the bottom 50% of the returns (yep, that's right, basically, the bottom 50% of the returns result in virtually no income tax revenue).
If the wealthy are against a VAT (and I've not seen a poll indicating this is the case), it's more likely to be because they fear that it would drag the economy down by discouraging consumer spending. Since the wealthy typically are investors, this reduction in economic activity would cost them far more than a VAT. Since a VAT is far more regressive than the US personal income tax structure, shifting to a VAT would actually benefit wealthy folks in terms of how much tax they paid (assuming, of course, that the government didn't just increase spending to use all the extra tax revenue -- which, of course, is probably a faulty assumption). Also, don't forget that a lot of states have a sales tax already - so that would, presumably, be on top of a VAT (for example, in two cities in California, Pico Rivera and South Gate, sales tax rates are 10.75%).
True... but your health care plan of the 80's wouldn't have paid for things like PET scans, many MRIs, Monoclonal Antibodies for cancer therapy, proton beam radiotherapy or many other expensive things that the plans that require employee contributions do cover. Of course, that's because these expensive medical treatments were either completely unavailable or so limited in supply as to limit access.
Application of expensive medical technology has increased dramatically in the past 30 years - we can argue if all of it (such as the proton beam example or the number of MRIs done) are cost effective or even helpful, but patients rarely reject them (esp. things like MRIs that have no long term side effects). It's not surprising that as the array of expensive services expected and demanded by patients has risen that workers might end up picking up more of the bill.
Interesting point... But, I don't think most people who took advantage of CARS were in the market for used cars under $8K and, mostly, they would be able, or nearly able, to buy a new car with or without CARS. I don't see that a $5K used car will suddenly be within reach of the $1500 budget student/poor person because of CARS. I suspect the slide you speak of, while real, would not come close to offsetting the depletion of $1K-$3K cars on the used market. (But then, I'm a software guy, not a microecon guy).
Agree mostly, but...
:(
The "building new car and scrapping old one" energy costs as well as the benefits of the improved MPG of the new car need to be amortized over the car's life. If a car would typically last 200K miles and it's scrapped prematurely under CARS at 100K miles, basically during the owner's lifetime an additional 1/2 a new car will need to be built and an additional 1/2 of an old car scrapped. Similarly, the benefit of the MPG increase is only for the remaining life of the old car. (For simplicity, I'm ignoring the energy costs related to repairing the older car in it's last 100K miles - I assume these are minor compared to the original manufacturing energy costs).
On the other hand, since new car MPG will continue to rise, this program has a (hopefully smaller) delayed bubble effect in a few years. The cars being purchased "early" under the program will be on the road for a while - say 15 years - while the cars being junked might have stayed on the road for another five years and then be replaced with a car that probably gets better mileage than the prematurely purchased car does. Thus, ten years from now, the average MPG of cars on the road will likely be lower than if CARS had never existed. Hopefully the increase of the average MPG of cars on the road between than and now due to CARS will more than offset this.
All I know is, I wouldn't want to be a college student or poor person (is that redundant?) trying to buy a $1500 beater right now
If you don't like the rebate program, just wait for health care reform designed by the same folks. I'm so excited I can hardly wait.