So, households in which people have jobs make more money than households in which they don’t. Wait - lemme write that down. I might forget.

While we’re at it, households in which people write laughably dishonest, excuse-making, fact-free screeds for think tanks that allow the greediest people who have ever existed in the history of the world to feel good about themselves make out really well.

As Roy Edroso put it, sometimes they write pieces to try to convince other people, and sometimes they write them to convince themselves. This is clearly one of the latter.

And why did the top 1 percent do particularly well? One potential explanation from CBO:  ”The compensation of ‘superstars’ (such as actors, athletes, and musicians) may be especially sensitive to technological changes. Unique characteristics of that labor market mean that technical innovations,  such as cheap mass media, have made it possible for entertainers to reach much wider audiences. That increased exposure, in turn, has led to a manyfold increase in income for such people.”

Nope.

http://www.mendeley.com/research/temporal-evolution-thermal-superthermal-income-classes-usa-during-19832001/

Personal income distribution in the USA has a well-defined two-class structure. The majority of population (97-99%) belongs to the lower class characterized by the exponential Boltzmann-Gibbs (“thermal”) distribution, whereas the upper class (1-3% of population) has a Pareto power-law (“superthermal”) distribution. By analyzing income data for 1983-2001, we show that the “thermal” part is stationary in time, save for a gradual increase of the effective temperature, whereas the “superthermal” tail swells and shrinks following the stock market. We discuss the concept of equilibrium inequality in a society, based on the principle of maximal entropy, and quantitatively show that it applies to the majority of population.

The “superstars” belong, by and large, to the right-most end of the first distribution - and are more noticable because their living depends on, well, being noticed.

The reason for the two distributions is contained in the words “swells and shrinks following the stock market”.  Its almost as if this is a mathematical demonstration of two classes - those who work and those who own.

Someone should write a book on that…

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http://coachingninjas.com/how-to-earn-money-from-top-affiliate-programs/

Indeed, a Treasury study on income mobility found that starting in 1996, half of taxpayers who started in the bottom 20 percent had moved to a higher income group by 2005.

People in their thirties often make more money than they did in their twenties. But is there real mobility? How often do people move to a higher income group than where their parents are?

I love the idea they’re trying to float that any increase in worth of the 1% is ‘cause of all those (no doubt Negro, Mexican, or other undesirables) ” actors, athletes, and musicians” who throw off the income curve and make it look like the ultra-rich have been making out like bandits since the start of the Glorious Republican Revolution began in 1981.

The ultra-rich have been making out like bandits — it’s just that actual income is only a small part of where their wealth comes from.  Investment earnings are not considered “income”, and when taxed (if you’re stupid enough not figure out how to properly use all those sweet tax loopholes), are taxed at lower rates.  The whole game has been rigged in their favor.

On the other hand, there is a relatively small amount of money that flows to “entertainers”, most of whom have short-to-non-existent careers — and in the case of athletes, they often have short lives too.

All this bullshit is just more distraction from the real issues.  But when there’s so much money at stake, we have to expect there’s going to be a continual blizzard of bullshit to keep the proles distracted while the wealthy pick our pockets…

How often do people move to a higher income group than where their parents are?

Less often than people in almost any other industrialized country, which is why those assholes were so careful about how they worded that talking point.

Really, I can’t even read that kind of shit anymore without starting to daydream about lampposts and guillotines.

i find the last point about “why did the top 1 percent do particularly well” very, very interesting. for most of the last decade or two, they claimed that it was because they were increasing productivity at their companies. that claims was also easily disproved with actual data, which showed no corresponding increase in productivity to justify the insanely increasing wealth. 

maybe they’re finally running out of excuses for the policies of the last 30 years that led to so much income disparity.

Really, I can’t even read that kind of shit anymore without starting to daydream about lampposts and guillotines.

I remain baffled by how much the 1% feels immune to mob violence.  Why should we accept a system in which we are unable to do the most basic thing on earth—start a family and raise children?

The “superstar” thing was part of the CBO report.  However, they are misrepresenting it (surprise!).  This does not refer to musicians and athletes, though they are a very small fraction of the people in the top 1%.  What it refers to is the tendency of the very top/most popular people in a field getting progressively higher salaries even as the median incomes of their peers stagnate or decline.

In other words, for CEOs, financial managers, etc., companies are paying higher and higher premiums for the “top” people.  Assuming the “top” people really are the top people at all, when all recent evidence suggests they’re not.  There’s a sort of analogy here to sports, though - the same hyperinflation of salaries for the top performers (real or perceived) happens in baseball, football, and basketball.  The difference is that sports franchise owners (a) have a salary cap to deal with, and (b) have a lot of pressure to dump/refuse to negotiate with players who are asking too much for what they can produce.

they claimed that it was because they were increasing productivity at their companies. that claims was also easily disproved with actual data, which showed no corresponding increase in productivity to justify the insanely increasing wealth.

Really?  Because Krugman has pointed to increased productivity over the past 30 years.  (I assume he has better knowledge about that sort of thing than I do.)  His issue with it is that increased worker productivity *usually* leads to increased incomes for workers themselves (as well as increased profits for their bosses).  But, despite skyrocketing productivity, American workers have gotten approximately jack shit for all their hard work.  And therein lies the problem.

”The compensation of ‘superstars’ (such as actors, athletes, and musicians)

You know, its funny they mention actors, athletes, and musicians.  Because there’s something all these well-paid professionals have in come.  They’re all in unions.

Via NPR’s Marketplace last night: Musicians, athletes and movie stars, etc. make up just 2% of the 1%.

“It’s also odd for AEI to argue that the poor should be getting better educated when they wrote three days ago that student loans should be means-tested.”

I was at first puzzled by this since point, since I assumed “means-tested” was in the same sense as the Republican bs about mean-testing social security. Because I’m a fool. So I clicked on the link and turns out “means-testing” means YOU MUST HAVE MEANS. Right wingers, always worse than you think.

I remain baffled by how much the 1% feels immune to mob violence.  Why should we accept a system in which we are unable to do the most basic thing on earth—start a family and raise children?

There’s a lot that people (at least most people) will accept before they turn to violence. Repressive and/or grossly unequal societies can and do endure for a number of reasons: they are able to make the costs of resistance too high, people don’t resist because they actually buy into the system and accept the paradigm, etc. The 1% probably thinks we haven’t reached that critical point in which mob violence becomes a legitimate threat to them (and when it does feel threatened, look out) and I’m inclined to think they’re right.

In other words, for CEOs, financial managers, etc., companies are paying higher and higher premiums for the “top” people.  Assuming the “top” people really are the top people at all, when all recent evidence suggests they’re not.

I think that CEO hiring practices work in a vicious cycle where no one wants to pay a “below average” salary for their CEO, so they spiral upwards for no real reason other than the fact that no company wants to confess to being “below average” compared to their peers.

I think that CEO hiring practices work in a vicious cycle where no one wants to pay a “below average” salary for their CEO, so they spiral upwards for no real reason other than the fact that no company wants to confess to being “below average” compared to their peers.

I don’t think it’s exactly a “vicious” cycle from the perspectives of the people making these decisions.

It’s certainly not any sort of cycle that could occur if wealthy people weren’t ideologically predisposed to give each other lots and lots of money.

I like the part that found that people in the lowest quintile were ‘in a higher quintile’.  Yes, they were almost all in moving within the next two quintiles.  Nearly none of them made it three quintiles, let alone to the top quintile at all.  So most people basically moved around within the bottom three quintiles, or stayed within one quintile of their parents.

I have to admit, I haven’t been ever counted by the census in a lower than the top quintile, even though I’ve never earned more than a few thousand dollars in a year.  They changed the definition of household to count elder children and then to count gays and other relationships even while still taxing them as individuals.

When my spouse was making 70K I wasn’t feeling very top-quintile.

Given the sense of the thread, I think this link will be appreciated by most pandagon’ers reading this thread.

http://bilbo.economicoutlook.net/blog/?p=16629

Tyro @ 15

“I think that CEO hiring practices work in a vicious cycle where no one wants to pay a “below average” salary for their CEO, so they spiral upwards for no real reason other than the fact that no company wants to confess to being “below average” compared to their peers.”

There is a real reason.  CEO pay is determined by the board of directors.  The board of directors is a bunch of CEOs of other companies.  Higher CEO pay is a goal for all of them.  It’s a racket.

I like the part that found that people in the lowest quintile were ‘in a higher quintile’.  Yes, they were almost all in moving within the next two quintiles.  Nearly none of them made it three quintiles, let alone to the top quintile at all.  So most people basically moved around within the bottom three quintiles, or stayed within one quintile of their parents.

This is important, because the income drop-off once you get past the richest few percent of American households is steep. To wit: if you’re richer than 80% of Americans, you’re still only making $90,000 a year. I say “only” even though that’s over twice the average American household income, but it’s not exactly multiple houses kind of money.

So basically, even if you’re in the second-highest quintile, you’re not making even $100,000 a year. So moving around between the bottom four quintiles is in no way an indication that your average American has any realistic shot of being a millionaire one day.

(Needless to say I appreciate that if you’re making $30,000 a year and move up to making $90,000, this is a huge increase in quality of life, but the point is, the 99% and the 1% are distinct groups who are played very different cards in life, and rare is the person who moves from one to the other.)

Triplanetary:

They like to pretend there’s a big difference between the quintiles… But there really isn’t.  And we’ve made it so that half of Americans make less than a living wage.  Without the middle class being in the middle, the whole measurement system fails.

Why do we have all the tax brackets in the bottom 90% when they earn less than half of the country’s earnings? 30K to 90K isn’t a big difference when you go from paying no income tax to paying a third of your income in payroll and income tax.  Your income has tripled but your net income has barely doubled.

That’s the difference between the 10am showing of a new movie and the 10pm showing.  It’s buying at JCPenny catalog instead of Ross.  You’re getting the same crap, just have to work slightly less hard to get it.

On losing ground: the size of the pie (United States Real Gross Domestic Product) has more than doubled since 1980, so anyone whose real income has grown by less than 1% per year during that period has been capturing a decreasing portion of the pie, while others have been capturing an increasing portion. Q.E.D.

In addition, you know that the AEI and the rest of the apologists for the rich and super-rich would scream bloody murder if their logic were applied to them. Imagine a tax system that has the characteristic that any time you have an increase in before-tax income, you have an increase in after-tax income. Earning more money makes you better off, so the incentives are preserved, so no problem, right? Oh. Yeah. Any marginal rate less than 100% will preserve that characteristic. But even 35% marginal rate is apparently too high for the rich.

Not surprisingly, the highest effective marginal tax rates, some of them 100% or more, occur at lower income levels where total benefits can be reduced dollar-for-dollar with increased pre-tax pay. But no one from the AEI spends a lot of time complaining about the anti-prosperity effects of those rates.

Crissa:

“Why do we have all the tax brackets in the bottom 90% when they earn less than half of the country’s earnings? 30K to 90K isn’t a big difference when you go from paying no income tax to paying a third of your income in payroll and income tax.”

Because that way the people who earn $70-90K can be convinced to be angry at the people who earn $0-30K, instead of being angry at the people who earn 300K-100,000K. Those people must be just like them, right? They’re in the same tax bracket….

Household income compared over time becomes problematic if it doesn’t take into account how a couple of things—are there two partners working to generate that income? Are they having to pay childcare expenses?

These two basic questions are essential to understanding and comparing household incomes; for a household run by a single, working mother or father, and a household with two working parents faces a lot of economic stresses that are otherwise hidden. Just so happens these stresses mostly fall on the women in the household, too.

Good job, Birkey. Next subject: How much did the Bachmanns rake in from our state’s socialized welfare system for their 23 foster kids that Michele never fails to remind us of?

Oak kitchen cabinets

But even 35% marginal rate is apparently too high for the rich.

It really astounds me the number of “moderates” and low-information voters who have been duped into believing that a 35% marginal tax rate is particularly high.

Triplanetary: that, and the sleight of hand that taxes capital gains and dividends lower than earned wages.

Nice keyword-driven spam on #26 (triggered by “Bachmann”). Getting sophisticated!

I have to admit, the America Enterprise Institute does a pretty good job of digging up factoids that superficially contradict an assertion they (or, rather, their paymasters) don’t like. Very crafty, taking the natural trend that people make more money in their thirties than when they entered the job market and calling it “mobility.” It’s as relevant as saying people are taller in their teens than when they were toddlers, but superficially it sounds meaningful. The real question is, how are people doing today relative to where their parents were at the same stage of their lives? By that measure, the “land of opportunity” narrative falls flat.

real median after-tax household income (half of all households have income below the median, and half have income above it) grew by 35 percent over the past three decades.

Two problems with this:
1) As Jesse points out, rising tides that lift all boats aren’t the problem; falling tides that managed to lift some boats anyway are. And it’s no comfort to have been lifted if you’re still under water.
2) The median is a very good measure in some ways but less good in others. There’s a minimum (it’s difficult, though I suppose not impossible, to have an income of less than $0) but no maximum, so if median household income is X, it doesn’t follow that the richest households only take in 2X; a rise in the median income can be smaller than the rise in what rich people are making
2a) Particularly if there’s no middle class to speak of, the median can go up if rich people get much, much richer while poor people get slightly richer or even slightly poorer.

Linnaeus, 14:

1% probably thinks we haven’t reached that critical point in which mob violence becomes a legitimate threat to them (and when it does feel threatened, look out)

E.g., Oakland.

Yeah, the outsized violence of Oakland is doing the 1% a lot of harm.

Have the poor lost ground to the super wealthy? If you demand a technical adherence to a recognizable meaning of “losing ground”, yes.

That’s a fine point. but its irrelevant a debunking of AEI. They are adhering to this common liberal usage of the term:

Low-Income Families Losing Ground in 2000s

Some analysts have hailed a recent Congressional Budget Office study which finds, among other things, that income grew 28% for low-income single mothers from 1991-2005. But an EPI Snapshot shows those analysts ignore the outcomes of two distinct time periods with different tales to tell. Over the last several years, these families have seen a loss of real income, a loss which has not been offset by the social safety net.
http://www.epi.org/press/newsflash_070606_losing_ground/

Here EPI is arguing that since income actually decreased in real dollars for low-income families, those families are “losing ground”. If true, this would indeed be worrisome, and even more worrisome than “losing ground” in relation to the rich…since in the latter scenario the poor can still be getting richer in absolute real dollars. 

AEI is claiming to debunk stuff like the above. Or put another way:

Angelina claims Brad is getting better looking with every passing year. Jennifer says that’s not true. So she cites a study demonstrating that more women find Manju better looking than Brad with every passing year. That study may very well be like totally accurate, but it doesn’t refute Angelina’s claim one little bit.

Would someone please let me know where I can get some of this income that magically comes from getting (straight) married? Because I got married last year, and neither of us is making any more money than we were when we were living in sin. My income has remained the same. My husband’s has gone down, because when the economy tanks, it’s much harder to get freelance work.

The one thing about marriage that does make us more financially stable? I’m on his health insurance from his day job now. Because he was lucky enough to get a day job that provides health insurance. In retail, because he obviously got a four-year college degree and invested a lot of time into developing marketable skills so that he could be grateful to work at the mall.

Gosh, it’s almost as if getting married doesn’t magically grant you a white-collar job with a good salary, a suburban house, two cars, and a white picket fence. It’s almost as if job creation and health care were actually the important economic issues.

Nah, can’t be.

It really astounds me the number of “moderates” and low-information voters who have been duped into believing that a 35% marginal tax rate is particularly high.

Especially given this sort of analysis:

I’ve been writing about the relationship between tax rates and growth since I started blogging in 2006. A lot of those posts have focused on the quadratic relationship between tax rates and growth. That is, it turns out that if you take US data going back to when the BEA started keeping track, 1929, you can easily build a model of the following form:

% change in real GDP from t to t+1 = a + b*Top Marginal Tax Rate at time t
+ c* Top Marginal Tax Rate squared at time t

I have modestly referred to that as the Kimel curve. Now, it turns out that for most variations on that theme I’ve come up with, b is positive, c is negative, and both are significant at the 5% or 10% level. That allows you to find a top marginal tax rate that maximizes growth… which turns out to be somewhere between 60% and 70% depending on how the model is specified.

We keep being lectured by wingnuts that the top marginal rate affects growth, so this guy just simply keeps running the numbers.  He continuously updates his moedl based on criticisms, and keeps coming back with the same answers. 

Yes, it matters (0.01That’s what the historical data says</b>, even when you adjust it to deal with spluttering “but… but… but…” objections.

Bugger - stuffed up the relationship signs on html.

Last line should read:

Yes, it matters (0.01 [ p [ 0.02). And to maximise growth the top marginal rate should be around 63-65%. 

That’s what the historical data says, even when you adjust it to deal with spluttering “but… but… but…” objections.

Get a full-time job that’s not available with the education you can’t pay for, and sustain it all by getting married to someone who also can’t find a job or get a degree.

This describes the situation my wife and I are living in exactly. We have 5 degrees between us but only 1 part-time job. I’m currently on unemployment benefits (making more sitting at home filling out applications then I would if I got a part time job). So yeah,paying off the student loans ain’t happening right now.

Re: Comment #33: snowmentality on 10/28 at 03:00 PM

Well, if you add your incomes and health insurance together, like in the statistics, of course your income went up.  You might have even gone up a quintile.

I know that means you probably didn’t change very much in lifestyle, there’s only so much money you can save sharing instead of duplicating efforts.

Also, spam at Comment #26: harleyshenoy on 10/28 at 04:06 AM

@33 and 37

Actually, I think they’re referring to the tax savings of two people married filing jointly, instead of each one filing as singles.

Being legally married allows for a lower total tax liability than two people with the same gross income filing two separate tax returns.  Legally married people can also transfer certain sums of money and property between them without having those transactions taxed.  Whereas, if it were two friends doing those types of transfers, each transaction would be subject to tax events. 

So technically, using marriage for the purpsoe of avoiding taxation has been calculated as a rise in income.  I’m not agreeing that income should be calculated that way, but that’s the right-wing argument when they try to prove that incomes among the bottom four quintiles have risen.

Does anyone know if they bothered to adjust their figures for inflation?

which turns out to be somewhere between 60% and 70% depending on how the model is specified.

Yes, and we also need more tax brackets. Since Reagan, we’ve been “simplifying” the tax code by basically just cutting out the top tax brackets. As Crissa said @22, “Why do we have all the tax brackets in the bottom 90% when they earn less than half of the country’s earnings?”

It’s not like somebody making $350,000 is struggling (though they’ll probably claim they’re “not that rich”), but there’s a big difference between taking 70% of $350,000 and taking 70% of, say, $100 million. Some entitled-ass rich dude who’s left with “only” $30 million would, of course, whine endlessly about what a victim he is, but there’s simply no real quality of life difference between $30 million and $100 million.

That, of course, assumes that we’d also be eliminating things like the capital gains tax and dividends tax, which we should.

Inflation occurs at roughly 3% a year on average in western countries (including the US).  Prior to 1980 wages were slowing down but still largely keeping pace with inflation.  Reagan created a backslide by which inflation ate into the value of the money.  The chart shows only the top 1% beat inflation.  The top fifth made about a 1/3 less than they should have and the remainder made almost 100% less than the inflationary value of their income.  Essentially the wages in our country have been halved except for CEOs and CFOs.  Even Doctors, lawyers, and people who make in the 6-figure range actually lost money in this system.  Minimum wage should be around $12-14/hour right now.  This whole argument is painful to look at when the right-wing insists everything is OK.

No, we should not be eliminating either capital gains tax or dividends tax, not unless those are then lumped in with regular income.  Otherwise, we should be eliminating it below a certain level, agreed, but they need to be taxed as those things or the same as other income.  Like all income, they need to be taxed.  What should be done about dividends is make paying them out a cost of doing business for the company, like other debt payments, as it used to be.

No, we should not be eliminating either capital gains tax or dividends tax, not unless those are then lumped in with regular income.

Yes, that is what I meant. I certainly didn’t mean that capital gains and dividends should go entirely untaxed. Rich people would never pay another dime! I meant they should be taxed the same as any income. There’s no legitimate reason that they’re not; just more free fellatio provided to the “overtaxed” upper-class.

Inflation occurs at roughly 3% a year on average in western countries (including the US).  Prior to 1980 wages were slowing down but still largely keeping pace with inflation.  Reagan created a backslide by which inflation ate into the value of the money.  The chart shows only the top 1% beat inflation.  The top fifth made about a 1/3 less than they should have and the remainder made almost 100% less than the inflationary value of their income.  Essentially the wages in our country have been halved except for CEOs and CFOs.  Even Doctors, lawyers, and people who make in the 6-figure range actually lost money in this system.  Minimum wage should be around $12-14/hour right now.  This whole argument is painful to look at when the right-wing insists everything is OK.

Huh? The chart is in real dollars. The RWing isn’t so stupid as to go with nominal ones. Or, if that sounds unconvincing, the CBO certainly isn’t. The dollars have already been adjusted for inflation.