Income Inequality?

[Cow Poke]

As the price of food in general goes up, healthy choices can remain affordable if funds are redistributed in a household's budget.

PM, now that I'm done laughing, let's try a little exercise...

Which is more expensive?

A) "empty carb" high calorie junk food?
2) healthy organic fruits, veggies and meats

For extra points....
When I'm teaching my Jobs for Life class tomorrow night, what do you think the response will be from the students when I read them the statement "As the price of food in general goes up, healthy choices can remain affordable if funds are redistributed in a household's budget."

For EXTRA extra points...
Do you believe poor people actually HAVE a "household budget"?

[Truthseeker]

One definition of inflation is an increase of money supply. Another definition is a general rise of prices. They are somewhat equivalent in that increases in the money supply tend to cause general price rises. For years, though, massive increases of money supply seemed to have little effect on prices. There is a technical reason at least, which I will not explain, why prices have not exploded skyhigh (yet).

Taxes are just bad, unless the government really does more good than bad. As long as the government really does more good than bad, I am all for letting the government have all the resources of the world. So . . . the question we should really consider is, can we rely on the government to do more good than bad?

[phank]

Somehow, this thread got off into the dispute over minimum wage. And nobody seems to have pointed out that, in real life, few people are actually making minimum wage, because such positions are inherently transitory - if you're not worth more than minimum wage after a month or so, you're fired. Otherwise, you get a raise.

Nor do I think anyone has pointed out (I haven't read every reply) why the minimum wage was enacted in the first place. A little history reading tells us that the "free market" doesn't naturally gravitate toward competition, but rather toward cooperation. In other words, if the major employers in the area get together and agreee not to pay their workers much, everyone wins except the workers. Such practices were the norm, and were what led to labor unions.

One measure of income disparity is to compare the wages of the average worker, with the income of the CEO. In Japan (I read somewhere), the CEO makes about 50 times as much, and in the US it's about 600 times as much. In Dilbert's company, if it's like enough others for the comic strip to hit home (and it does), you can expect the pointy-haired boss to make double what Dilbert, Alice and Wally make together. AND you can probably guess that Wally makes considerably more than Alice.

So part of the income inequality problem is that equal work doesn't earn equal pay for reasons external to job performance. And mostly I think this problem is a function of salary secrecy. As Townsend wrote in Up the Organization, speaking directly to top managers, "you do not DARE to post everyone's salary." Townsend didn't recommend doing so, because it distracts people from their jobs, but his argument was that everyone could SEE that your cousin over there, who doesn't actually do anything, is being paid triple what anyone else is making. The military gets this right - everyone wears their pay grade on their sleeve or collar, everyone knows how much everyone is making, and everyone knows the requirements to be promoted.

I don't think anyone is arguing for income equality across the board, or anything close to that. Mostly they mean two things: equal pay for equal work, and the desirability of a true middle class, rather than a few rich and many poor.

[Bill the Cat]

I favor the Fair Tax.

I favor a 10% consumption tax. Any good or service that changes hands is taxed at a flat 10%. No tax breaks, no loopholes, no exceptions. Tax code would be dramatically less complex, and revenue would be steady and sustainable.

[phank]

I favor a 10% consumption tax. Any good or service that changes hands is taxed at a flat 10%. No tax breaks, no loopholes, no exceptions. Tax code would be dramatically less complex, and revenue would be steady and sustainable.

Would this apply to charitable contributions?

In any case, the problem with this approach is that for most people, and especially for the bottom 40% or so, 100% of their income is spent on something, so they would see 10% of their income taxed away. For wealthy people, not so much. Their fortunes keep rising with no changes of hands involved.

And how would this apply to a business? Would payroll count? Depreciation? Investment?

These details probably matter.

[Bill the Cat]

Would this apply to charitable contributions?

Yes

In any case, the problem with this approach is that for most people, and especially for the bottom 40% or so, 100% of their income is spent on something, so they would see 10% of their income taxed away.

Which is fair.

For wealthy people, not so much. Their fortunes keep rising with no changes of hands involved.

If they buy anything, they would get taxed.

And how would this apply to a business?

If the business purchases something, they get taxed 10%

Would payroll count? Depreciation?

No

Investment?

What kind?

These details probably matter.

They do. It's a consumption tax, not an income tax.

[phank]

If they buy anything, they would get taxed.

This is why sales taxes are regressive. The rich spend only a small proportion of their income, while the poor spend it all. The net, effective tax rate is therefore much higher on the poor.

Most people drive somewhere around a thousand miles a month (yes, there are exceptions, but most are pretty close to this average). The excise tax on gas is quite high. Let's say most cars get around 25 mpg, and gas costs $3 a gallon, of which $2 is excise taxes. So the rich and the poor are each paying about $80 a month in gasoline excise taxes. Guess whose paycheck this takes a bigger bite from?

Somewhere (I don't feel like looking it up right now), I saw a calculation of the percentage of one's income paid in taxes of all kinds, graphed against total income. The graph was kind of surprising - the poor pay something around 20% of their income in taxes of one kind or another, while the richest pay somewhere around 30%. And this despite the poor paying NO income taxes, and the rich paying nearly 30%.

To avoid this "soak the poor" curve, most flat tax proposals are on income rather than purchases. But even with a progressive income tax, even with 50% of the people in the US paying essentially no income tax at all, we notice the rich get richer and the poor get poorer and the middle class is shrinking. So something isn't working right, and the graph I referred to above indicates that the tax system considered altogether isn't particularly progressive.

And still, the objection to flat tax proposals isn't that they tend to be even more regressive than we have today, it's that they are simple and easy! Taxation pretty much worldwide has two purposes - to raise revenues for government, and to manipulate behaviors in desired ways. Want more charitable contributions? Make them tax free. Want broader education? Offer tax breaks. Want to discourage "vices"? Tax the beejezus out of them. Give breaks for having children, owning a home. The desire to get people to do some things and avoid others isn't going to change.

[Jedidiah]

I favor a 10% consumption tax. Any good or service that changes hands is taxed at a flat 10%. No tax breaks, no loopholes, no exceptions. Tax code would be dramatically less complex, and revenue would be steady and sustainable.

I favor an end to the IRS. I am a Repeal 16 nut.

[seer]

So if the minimum wage does not, in fact, necessarily lead to a higher inflation and is a "small part of the picture," why make that your argument? Whatever you think raising the minimum wage should do to the inflation rate, it's clear from history that it doesn't necessarily lead to increased inflation. Your question is therefore answered: we've given the hamburger flipper a raise at various times in history (seen, again, on the chart) and that has not caused a increase in the price of hamburgers.

The answer is therefore "probably not and almost certainly not in this case, at least in the mid-to-long term."

No Sam, it has in fact made my burger more expensive. This rise in price is mostly passed on to the customer - you raise the price for the goods and services where the workers are getting the minimum wage. You inflate those prices. That does not necessarily mean that other parts of the economy follow suit. You may have other conditions in the economy (like lower energy prices, when energy was included in the index) that could lessen the index. Or cheaper imports. What was the cost of a McDonald's hamburger in 1965 as compared to today? That increase is not totally due to the minimum wage, but you can bet it was a good part of it.

[Psychic Missile]

I don't know where you come from, but here we consider food a necessary expense. If you have to give up cable tv to eat, that would not be unreasonable. It just means you need a better job.

I was thinking healthcare, not cable TV.

first, "groceries" is not one thing. It is a conglomeration of products. So you can't just lump them into one thing. Each product is produced and sold by different companies.
Second, labor isn't an negligable cost. It is one of the major costs in producing anything. This goes back to my comment that you don't really understand economics at all.

The cost of grocery staples can have a net increase. Unless you can give me evidence that a higher minimum wage would raise the price of most goods more than say, ~10c, I can't accept your argument that the higher cost warrants forbidding a higher minimum wage.

[Psychic Missile]

Of course not -- you're a redistributionalist!

Okay...

You keep avoiding the question. It's not that Homer "wants to be paid less than Mary" - that's just dumb. He made a contract with an employer, and he honored it.

I can't accept the question because I don't understand it. Why would Homer not want to be paid more?

And the sky turns blue, the birds sing, and the rainbow spreads from sea to shining sea.

You REALLY don't have a clue about economics on a personal level, do you?

I've noticed you like to avoid presenting arguments for your opinions and just make observations. That's not conducive to a discussion.

[Psychic Missile]

PM, now that I'm done laughing, let's try a little exercise...

Which is more expensive?

A) "empty carb" high calorie junk food?
2) healthy organic fruits, veggies and meats

It can depend upon the location, but generally healthy food is more expensive.

For extra points....
When I'm teaching my Jobs for Life class tomorrow night, what do you think the response will be from the students when I read them the statement "As the price of food in general goes up, healthy choices can remain affordable if funds are redistributed in a household's budget."

I don't think there's anything peculiar about it.

For EXTRA extra points...
Do you believe poor people actually HAVE a "household budget"?

If they don't have a formalized budget, they probably have an informal, mental budget of things they allow themselves to spend money on and things they are willing to concede if expenses go up.

[Cow Poke]

I can't accept the question because I don't understand it. Why would Homer not want to be paid more?

That's totally beside the point -- he accepted the job at the pay posted, What he "wants" is beside the point -- I want to be younger and skinnier!

I've noticed you like to avoid presenting arguments for your opinions and just make observations. That's not conducive to a discussion.

I had already made the arguments - you seem incapable of understanding them. You don't have a CLUE about economics.

[Cow Poke]

It can depend upon the location, but generally healthy food is more expensive.

That's just silly. In WHAT "location" would junk food be more expensive than healthy foods? Healthy foods are more expensive by quite an order of magnitude.

I don't think there's anything peculiar about it.

Because you don't understand real life economics.

If they don't have a formalized budget, they probably have an informal, mental budget of things they allow themselves to spend money on and things they are willing to concede if expenses go up.

You have NO CLUE about how poor people operate.

[Psychic Missile]

Because you don't understand real life economics.

Or because I'm right.

You have NO CLUE about how poor people operate.

Can you give me an example that contradicts my statement?

That's totally beside the point -- he accepted the job at the pay posted, What he "wants" is beside the point -- I want to be younger and skinnier!

The issue is it looks like something fishy is going on. Your example is either unrealistic or someone is scamming someone else.

I had already made the arguments - you seem incapable of understanding them. You don't have a CLUE about economics.

I admit it's a weak area for me, but my knowledge of a subject has no impact on the validity of my arguments. They should stand or fall based on their own merit.