Salary.com is a site to learn a lot about income, tips to improve your chances, and more. Now, they have published this interesting remarks about this problem. We reproduce it for your benefit: May be you do not support every claim, which mostly are from one side of the social aisle, but are worth to consider and to know of.
Why the Gap Between Rich & Poor Is Widening
Why the Rich Get Richer & the Poor Struggle
Numbers released by the U.S. Census Bureau earlier this month confirm what many have known for a long time: The gap between the rich and the poor in this country is growing ever wider. And while we examined the numbers behind the income gap last week, we heard your requests for an actual explanation of why it exists loud and clear.
Technology -- The Double-Edged Sword
Just as technology has worked its way into our daily work lives, it has also had a significant big-picture effect on employment, according to a March 2012 report from the nonpartisan Congressional Research Service.
On the bottom end of the income scale, technology now performs some of the functions that once went to low-skill workers. Furthermore, technological changes -- like improved computer and telecommunications systems -- have enabled more U.S. companies to send jobs to countries with lower labor costs. With more workers competing for fewer jobs, wages for low-skill occupations dropped. At the same time, technology has been a boon for some higher earners. In fields such as engineering and law, technology "serves as a complement to high-skilled workers, which has raised demand for and the relative wages of these workers," the report concludes.
Current Tax Rates Favor the Rich
Then there's the current tax rate structure, according to a separate, recently released analysis by the Congressional Research Service. The average federal income tax rate for the highest-income taxpayers has been falling steadily for the past 60 years, according to the report. Most recently, the so-called Bush tax cuts enacted in 2001 and 2003 lowered the top marginal tax rate from 36.9 percent to 35 percent.
The natural effect of lower tax rates is that the wealthiest get to keep more of their income, which tends to widen the gap between rich and poor, according to the CRS analysis. Lower tax rates, the report suggests, may also act as an incentive for top earners to negotiate even higher compensation; the lower the tax rate, the more of each additional dollar the worker gets to keep. Indeed, the report concludes, "the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution."
Capital Gains
The Bush tax cuts also lowered taxes on capital gains -- the profits realized when assets, such as stocks or real estate, are sold. At least until the end of 2012, the top capital gains rate is 15 percent, down from 20 percent in the 1990s (the rate was 28 percent before that). At the same time, those at the very top of the scale are making a higher percentage of their income from capital gains; in 2006, the top 1 percent made 38 percent if their money from capital gains, up from 31 percent 10 years earlier. And when higher capital gains incomes combine with lower tax rates on that money, it makes mathematical sense that the richest household would increase their earnings faster than those lower down the scale.
Shifting Social Norms
Outlining this theory in a 2002 New York Times column, Paul Krugman explained that after the New Deal and World War II, the national mindset tended towards equality of pay and more humble, community-oriented executives. Somewhere around the 1970s, however, those norms simply began to unravel, creating greater social acceptance for the sky-high executive compensation we see today.
Recommended Reading
Thank you for reading. As an added bonus, the Salary.com editorial staff has compiled a recommended reading list regarding this topic. Enjoy:
- The Price of Inequality: How Today's Divided Society Endangers Our Future
- End This Depression Now!
- The Great Divergence: America's Growing Inequality Crisis & What We Can Do About It
- The Betrayal of the American Dream
Some comments to consider:
You forgot debt. When someone lives in debt, they create wealth for others and create poverty for themselves. Why is no one paying attention to this point?
The basis for taxation is NOT wealth redistribution. It is to undertake common projects (http://www.youtube.com/ watch?v=CMLgEnDGkG4) roads, lighting, waterworks, sewage, libraries, etc. Why? Because most things are more efficient when done as cooperative/combined efforts, and some just become viable altogether. Once you have these common infrastructures you are faced with the challenge of what to do with people who cannot pitch in; which is resolved by unequal loads.
You want to remove unfair taxes? Do away with sales taxes, heck, and even income taxes below $100k.
Apply only capital taxes (making money without working for it) and property taxes beyond a threshold (on second car, x number of square feet per person, inheritance beyond $5M, etc), raise them as high as needed to cover the costs. Keep the costs as low as possible. Simple.
It is not only solely the gap between the rich and the poor but the distribution of wealth in the U.S.. Pareto observed a century ago that 80% of the land was held by 20% of the people. In the U.S. today, that ratio is 98:2 and moving toward 99:1, an unsustainable economy.
But consider also Schumpeter's gale - creative destruction - which would lead one to conclude that the imbalance will be remedied. Only the means is uncertain.
I'm not saying there isn't a problem with the widening gap between the rich and the poor, however, I do want to point out one thing. The article is misleading when it says the tax rates favor the rich, and many of the comments here echo this misunderstanding. Lower income people pay lower tax rates, or no taxes at all. Almost half of U.S. households do not pay federal taxes due to low income status. As you earn more money, your marginal tax rate increases. No lower income person is paying at a 35% income tax rate, but "wealthy" individuals are. The definition of a marginal tax rate is that the percentage you pay for each additional dollar earned goes up. This is still true today. $8700 of your earnings is taxed at 10%; from $8700 to $35350, you pay 15%; $35350 to $85,650 is taxed at 25%. If you don't make over $85,650 th..
Thank you for reading. As an added bonus, the Salary.com editorial staff has compiled a recommended reading list regarding this topic. Enjoy:
- The Price of Inequality: How Today's Divided Society Endangers Our Future
- End This Depression Now!
- The Great Divergence: America's Growing Inequality Crisis & What We Can Do About It
- The Betrayal of the American Dream
Some comments to consider:
You forgot debt. When someone lives in debt, they create wealth for others and create poverty for themselves. Why is no one paying attention to this point?
The basis for taxation is NOT wealth redistribution. It is to undertake common projects (http://www.youtube.com/ watch?v=CMLgEnDGkG4) roads, lighting, waterworks, sewage, libraries, etc. Why? Because most things are more efficient when done as cooperative/combined efforts, and some just become viable altogether. Once you have these common infrastructures you are faced with the challenge of what to do with people who cannot pitch in; which is resolved by unequal loads.
You want to remove unfair taxes? Do away with sales taxes, heck, and even income taxes below $100k.
Apply only capital taxes (making money without working for it) and property taxes beyond a threshold (on second car, x number of square feet per person, inheritance beyond $5M, etc), raise them as high as needed to cover the costs. Keep the costs as low as possible. Simple.
You want to remove unfair taxes? Do away with sales taxes, heck, and even income taxes below $100k.
Apply only capital taxes (making money without working for it) and property taxes beyond a threshold (on second car, x number of square feet per person, inheritance beyond $5M, etc), raise them as high as needed to cover the costs. Keep the costs as low as possible. Simple.
It is not only solely the gap between the rich and the poor but the distribution of wealth in the U.S.. Pareto observed a century ago that 80% of the land was held by 20% of the people. In the U.S. today, that ratio is 98:2 and moving toward 99:1, an unsustainable economy.
But consider also Schumpeter's gale - creative destruction - which would lead one to conclude that the imbalance will be remedied. Only the means is uncertain.
I'm not saying there isn't a problem with the widening gap between the rich and the poor, however, I do want to point out one thing. The article is misleading when it says the tax rates favor the rich, and many of the comments here echo this misunderstanding. Lower income people pay lower tax rates, or no taxes at all. Almost half of U.S. households do not pay federal taxes due to low income status. As you earn more money, your marginal tax rate increases. No lower income person is paying at a 35% income tax rate, but "wealthy" individuals are. The definition of a marginal tax rate is that the percentage you pay for each additional dollar earned goes up. This is still true today. $8700 of your earnings is taxed at 10%; from $8700 to $35350, you pay 15%; $35350 to $85,650 is taxed at 25%. If you don't make over $85,650 th..
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