Taxation

Drew no matter how you slice it there will always be inequality because there is an inequality of Intelligence. Also there is a direct correlation between how much risk and responsibility someone is willing to bear. If a guy doesn't finish high school and works on an assembly line putting lug nuts on a wheel as it comes by, his time and labor is not as valuable as a guy who has invested $100,000 to get a degree to learn a profession. The guy on the line doesn't risk anything except being able to keep up with the line. When the work day ends his job is done and he doesn't have to think about it until tomorrow. The professional often takes his work home and runs the risk that he may fail, lose his job, reputation, and maybe all his invetment. The guy on the line can be replaced easily by another in 5 minutes. The professional is not that easy to replace and it takes a longer time and a more extensive search. Bottom line is that people will always get paid more for what they know not what they do.

People keep mistaking intelligence with knowledge or experience or ambition.

How many top earners in America (here is a list of 100) are there who move to the top of their field without formal education. Intelligence comes in many forms, some may seem to be lacking in an intellectual grasp of concepts considered smart while excelling at a skill of another sort (ansel adams is on that list).

Sure an assembly line lug nut installer could be replaced (I thought they used robots for that today). What about the skilled workers running complex machines at a plant manufacturing refined copper rod and plate? What about the skilled operators running heavy equipment that build the factories, roads and other structures? Sure you could replace a heavy equipment operator with a new guy off the street but your investors will probably have to pay for the equipment he tears up or the fiber optic wire he rips apart or the lives lost when he ruptures a gas line.

My point is the people who invest in a company should not get as much money as the people who actually do the work. I read an article about a man who worked at 2 different McDonalds (because neither one wanted to pay him full time pay or benefits). In this article they showed exactly how much money he took home for his hours and how much profits went to the investors. Even after paying for the overhead and salaries of all the workers, the investors were making as much as this minimum wage worker. I know those investors only make a little bit each so it doesn't look like much to each of them (because they only own a few shares each) but it is ridiculous that so much profits should be redistributed to investors who pay less in tax for the money than the guy who actually did the work that earned the profits.

I found the article again, here is the part that I awas talking about: Shareholders, not employees, have reaped the rewards. McDonald's, for example, spent $6 billion on share repurchases and dividends last year, the equivalent of $14,286 per restaurant worker employed by the company. Here is the link to the article.

Drew K

Drew- Nothing you have said changes the same dynamic. people who are willing to put their own capital at risk are rewarded more than people who just do the work. Sure the skilled operators are worth more than the assembly line worker just as the college grad is worth more then the skilled worker. And the skilled worker will be more difficult to replace because he has more training just as the college grad will be even more difficult than him. That presents an interesting situation. Why should the assembly line worker be paid more than say a finish carpenter. The carpenter possesses more skill and knoweledge and probably owns his own tools. It is no surprise that GM went bankrupt with the average worker being paid more than a master carpenter or an electrician. And don't confuse intelligence with education. They are not synonamous. If those workers want to be paid more there is nothing stopping them from getting their checkbooks out and buying stock.

Look at the graphs in this link. In the last 30 years 90% of income earners have seen the smallest increase in income. Their income has NOT kept up with inflation. In the last 10 years they have seen a relative decrease in income! How are 90% of income earners supposed to have the money to invest?

You want to know why GM went bankrupt? I would bet it was because they were paying their workers closer to what inflation shows they should earn...and because not enough employers were, they couldnt compete.

Outsourcing slavery by having foreign workers earn just a few dollars a week so some corporate investor can buy an extra house on the beach is wrong...but what is really wrong is that by outsourcing the labor we have crippled our own economy. The western countries workers cannot compete with the wages their goods demand of foreign laborors.

Solution? Tax the crap out of products produced in sweat shops. Raise the minimum wage to somethign acceptable...pay people what they are worth. When 90% of the earners can make a wage that will keep up with the cost of living they will spend their money and float the economy.

Trickle down economics doesn't work when you dam the river so the rich have a pleasure lake.

Drew K

It's a beautiful concept.

The reality is, that in order to compete, US workers must settle for way less money.

The world has become a much smaller place. If you think that the US will ever be able to force other countries, (China in particular), to pay union wages, you are dreaming.

Utopia doesn't exist. Sorry. We in the US have fooled ourselves. A person that installs the glove compartment in a Chevy Cavalier all day long, will never be worth $65K a year. Take the unions away, and someone will be happy to do that job for $12 an hour. They are lined up.

Kramarat and Drew, you both make valid points, and the truth likely lies somewhere in the middle ground.

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I don't think either of your suggested solutions will be of much help. Raising the minimum wage is unlikely to increase the number or income of US jobs. Paying US workers the rates of Chinese workers isn't going to work well for the US or China for that matter.

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One of the problems is that the current US tax policy serves as a disincentive to employing US workers. Both income taxes and payroll taxes ultimately increase the cost of goods and services originating in the US. This is a significant advantage for foreign made goods and services and serves to reduce US competitiveness and drive employment overseas.

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Replacing income and payroll taxes with something like a national consumption tax could provide significant benefits to the US economy by working to make the competitive playing field a bit more level.

I'm sorry but your solution is an oxymoron. You can't raise the minimum wage to something acceptable and then pay them what they are worth because they are frequently worth less than the minimum wage. Raising the minimum wage does nothing except create more unemployment and increase the governments revenue (which is why the democrats like it so much). When they raise the minimum wage waitresses and bartenders must declare more of their tips as income and pay more taxes.The market is perfectly capable of setting its own minimum wage rates without the governments help. When I had my own construction business the minimum wage was $5.25 per hour but I had to pay at least $7.50 per hour for a receptionist and $10 to $12 per hour for construction labor because otherwise I could not find anyone willing to take the job. The market set the rate. GM went bankrupt because of the sweetheart pension and benefit deals it gave to the unions which made it uncompetitive in the world market. The unions effectively priced themselves out of the market.

There's another aspect as well.

Typically, there is learning taking place when a person accepts a job with a small wage. The knowledge gained is worth far more than the hourly rate, and will last a lifetime.

With a forced higher minimum wage, employers will not be very likely to pay people as they learn the ropes. Entry level positions will disappear, and all openings will require prior experience. I feel bad for our young.

The alternative is a collapse of the economy. Did you look at the graph I linked to? Workers in industrialized countries are getting paid less for their efforts than they did just 10 years ago.

Did you read the article I linked where the investors made $14k from each worker? That is more than the worker is making! How long can the working class continue to support decadence and corporate greed that gives too much profits to the wrong people?

The solution is NOT to just have the workers invest and thus make more off of their earnings, they cannot afford to live much less invest!

Drew K

This is a professor you know? ...at a college local to you?

No. This is a story I found on another website and I reposted here because it seemed appropriate to the conversation.

It is a fable that also exists on another thread here at CR4. It does exemplify the folly of imposed communism. The folly comes from imposing communism onto a group. When the group can choose their members, like a monastery, commune or kibbutz, then true communism can work. In this story the "A" effort students, unhappy in getting perceived grades, could not choose to leave or throw out the "D" or below students for apparent laziness.

Thanks for being forthright about it.

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To be completely forthright myself, I have seen the story before and wanted to see if when pressed for support for the story, any might be fabricated. Not the most noble thing on my part, however, you emerged unscathed.

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What motivated this pettiness on my part? I really dislike this form of attempted persuasion, namely:

a fictitious anecdote, usually implied to be factual (not overtly stated, perhaps for plausible deniability), that purports to provide a real world example, or otherwise exemplify outcomes that validate whatever idea is being pushed.

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Just to be clear here, I am very much in support of very limited government, so this is not an adverse reaction to what is being suggested by the story provided.

To the contrary, part of what I dislike about this particular tactic, is that it serves to discredit the argument it is intended to support:

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If the problem is so readily apparent (and it is), there should be plenty of actual real world examples (and their are), so why parrot this farce?

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Alternately, some fiction presents ideas in a way that remains honest and engenders insight into complex subjects with concision unrivaled by real world examples. I don't think this story qualifies, but if it did, then surely it could stand on those merits, presented the fiction it is.

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Two posters have already described this as an 'example' or 'exemplifying' certain consequences. Both posters unambiguously state knowledge the story is probably fictional, yet categorize it as an example. These are fairly bright posters, and this type of misnomer may never get confused in their mind, but I am quite certain that there are masses of people who receive and forward this type of 'example', and are significantly influenced in their thinking.

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OK, I'm glad to get that out. In retrospect, I should probably direct my displeasure at those people so easily swayed by nonfactual email tales, and not someone who re-posts it.

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This sounds similar to the story about the company John Galt worked for in Ayn Rand's Atlas Shrugged.

Of course it is an example of why socialism on a scale much larger than a family unit is nearly impossible to work. It is probably also not a true story but an example (the students who will graduate from college would be angry about the curve lowering their grades but as long as they can pass they will even if they have to drag the lazy with them).

Your numbered statements are good until the 5th one. The problem is greed and elitism; the class separation between the people with more money than they can spend and the people who are working 70 to 80 hours a week just to pay rent, buy food and provide some semblance of lifestyle is just too great.

Look at the graphs I posted previously! The income separation is too great to be sustainable. Read the article about the guy working at McDonalds, too much of the profits of his labor is going to people who don't earn it!

The problem is greed, and the elitists who have the wealth also are or buy the politicians that make this all possible. We are becoming Rome where the Senators and elite citizens are being outnumbered by the working class and slaves (who are not the earning class).

Drew K

Drew- Be careful that you do not confuse the cause and the effect. People who are poor work a lot of hours to buy food and pay the rent because those costs are going up faster than their pay rates. But why are those costs going up? The rent increases because property taxes, insurance and labor costs go up. Property taxes go up because local governments and school boards have built in cost of living ajustments to their labor costs. Food goes up because the cost of fuel to farm, process, transport and distribute that food goes up. In this case most of that increase is due to the deficit spending by the government which inflates the money supply and devalues the dollar. Give everybody on the bottom a raise and the costs will rise some more. The best thing that could be done to help the poor is to stop the deficit spending by the government and stabilize the costs so that they don't keep increasing at such a rapid pace. Tie the value of money to some standard instead of a fiat currency and lower everybodies tax rates to one flat across the board rate and then force the government to balence the budget and live within its means.

I don't disagree that Govt spending is irresponsible. The Govt does get a little break because it is such a big organization and is attempting to placate a widely varying population.

I believe a bigger part of the problem is the fact that corporate greed is tied to promotion. If a business manager does not increase profits every year they will not be promoted to the regional management and so forth. This causes a tremendous drive especially in the upper regions to show the 'board' that you are good for the company and worthy of promotion.

This leads to hiring expert psychologists to identify customer base and study the customer by any means possible (legal or not). This drives internet companies to stomp all over what is right or wrong (and getting away with it because we all sign away our rights when we click ok on the terms of service).

These experts design advertising campaigns that make us believe an anneroxic model is the ideal woman. That we have to have the best and newest of everything. This drive in Engalnd was so strong that people would pay to have vanity plates that made their car look a year newer (license plates in England include a code that shows the registration year).

You combine this proffessional psycholigist advantage with the media blitz of spend spend spend and the uninformed, uneducated consumor will spend themselves into oblivion.

Drew K

Nobody seems to be willing to take into account, that we, (humans), continue to reproduce.

Regardless of our particular education or specialty, the more of us there are, the less we become worth, (monetarily).

It's a bitter pill to swallow. My recommendation, would be to learn to live frugally.

I believe this paradox is one of the fundamental reasons that we came off of the gold standard.

It's (Arthur) Laffer, not "Laffler"; his original curve sort of switched the independent versus dependent variables, making it less than ideal from the beginning. The shape would be a bulge, with one end at (0% tax rate, 0 revenue) and the other at (100%tax rate, unknown revenue). The bulge could be skewed to one side or the other, not necessarily symmetrical. Martin Gardner's snarl was a bad joke. Etc.

Well said. The spending power of the working class is what drives our economy and funds the govt through the taxes they pay (income and sales). They are the greatest consumer and earning potential. If they don't earn enough spending money it will all dry up.

We need to push to pay them what they are worth!

Drew K