Relevant and even prescient commentary on news, politics and the economy.

Defining Rich VI: 1936 tax tables

Today we are continuing to look at the historical tax tables to see how we viewed and possibly defined rich. I introduced this idea with my post: Defining Rich III.
 
I found a source for all sorts of historical data from the Census Bureau. You can down load it or the better way is to click on the PDF file which brings up the Intro and then click on any of the listings of the table of contents which takes you to that set of PDF data.  For this posting regarding income data I am using this section.
 
The average weekly income for all manufacturing was $22.82 per week on 39.1 hours work. The highest paid was printing/publishing newspapers/periodicals at $35.15 per week on 37 hours work. The lowest was cotton goods at $13.80 per week on 37.5 hours of work.
 
In the non-manufacturing sector the I calculated the average weekly income to be $23.76 on 40.28 hours of work. The highest earnings were electric power/lights manufactured gas at $31.70 per week on 40.2 hours work. The lowest was hotels at $13.97 per week on 48.3 hours of work. For the Walmart greeter retail trade-general merchandising it was $17.51 per week on 40.8 hours work.
 
There were regional differences also. The most glaring is the north/south difference. The hourly wage ranges from 12.5 cents to 19 cents less if you worked in the south. The greatest differences being between the East South Central and the Pacific North.

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The Time I Offered to Bet $10,000

Note: I wasn’t going to post this, but after all the flack Willard Romney is receiving about offering to bet his fellow millionaires $10,000, I find myself in the unusual position of being sympathetic to him.  Therefore, the story of the day in early November of 1992 on which I offered to bet $10,000:

UPDATE: Paul Mulshine (h/t Blue Jersey) claims that had Perry taken the bet—that is, had the courage of his convictions—he would “have awarded him the 10 grand.”***** Instead, Perry claimed he’s “not a betting man,” all evidence contrariwise (e.g., his continuing this campaign) notwithstanding. Instead, the multimillionaire lied. Good thing he’s not running on character.

I am, truth to be told, probably a lousy poker player.  Not so bad as Barack Obama, but—aside from tells—when I see a sucker, I don’t hesitate.

So, a while back, when Lance Mannion (of Lance Mannion is Still Wrong fame) started tweeting about how Obama’s recent activities meant that liberals need to double-down and work to get large Democratic majorities for Obama in 2013. Since that worked so well in 2009-2010, I went looking for an opening.  And found one:

Really, Boehner almost lost his Speakership over this, he may yet, and he sounds like he won the World Series – http://goo.gl/di359

which required an appropriate, calm, measured reply*:

@LanceMannion Really, Obama lost his Presidency over this, and he sounds as if he’s cruising toward multimillion dollar CofC [Chamber of Commerce] speaking fees.

which produced the bet:

@klhoughton Dinner says he’s re-elected.

which lead to a discussion of betting on Presidential elections, which I admitted I only did once before:

K: I did bet $10K that WJC would win. But that was the day of the election. Now, my biggest risk is that Romney beats Bachmann.

L: You bet HOW MUCH?????

K: $10,000. (Trade was vetoed by my boss. Long story. Still bitter.) Other side was someone who is prominent [and from what I can tell a major source] in [William D. Cohan’s] House of Cards.

The bitter story below the fold.

It’s Election Day, 1992.  I am (somewhat) young, single, paying about $600/month in rent, and making Real Money for the first time in a year or so. (Ask your grandfather about the recession of 1990-1991.) In short, I am not liquidity-constrained.

Alan “Ace” Greenberg—the last CEO of Bear Stearns who was worth paying—had endorsed William Jefferson Clinton several months previously. He was the first head of a Wall Street firm to do so, but not the last.

Meanwhile, George H. W. Bush has been going around the country for the past week, campaigning as if he doesn’t want to win.  Or at least that’s the way it sounded to me, and I suspect the majority of the American people. It’s long after the Supermarket Scanner incident,** but he has spent the past two days yelling—calling Al Gore “Ozone Man” in Detroit—and generally Not Being Serious. For a candidate whose major strength is that he is Serious, it was clear that he was expecting to lose.

When the candidate expects to lose, it’s not a bad idea to bet against him. His information is likely better than yours, and his “tell” is showing.

So when one of the salespeople, who had a rather short temper, was pontificating at the end of the day about how GHWB was going to win that evening, I offered a friendly wager. At least, it started out that way.  But this is Wall Street.

Ken: “Bet you $10 Clinton wins.” As I said, trying to keep it a friendly wager. We would spend more than $10 on lunch (which was a company expense anyway).

Salesman (irritated at being challenged): “Make it $100.”

Well, when the mark says, “Take my money!” it’s at least a venial sin not to do so.  But if we’re going to talk about real money…

Ken:  “Make it $1,000.”

Salesman (getting angrier): “If you’re that certain, make it $10,000.”

At this point I hesitate. Not for effect, but just to do the calculations.  I know I have about $20,000 in liquid assets*** at the time, so another order of magnitude is out of the question.****  Can I afford to lose A Sure Thing?  Absolutely.

Ken: “Done.”

At this point, my boss—who had met the soon-to-be-former President and still thought fondly of him—intervened. (It is left as an exercise whether he made it up to me in bonus.)

So when millionaire Willard “Mitt” Romney offers to bet $10,000 with millionaire Rick Perry or millionaire Newt Gingrich, he’s basically fitting the minimum criterion for “this should get your attention.”  It’s hardly an “all-in”bet; as Hendrik Hertzberg notes, it’s more a casual wager.

As Francis Scott Key’s descendant once noted, “The rich are different.” And Papa’s rejoinder, “Yes, they have more money” is especially relevant when judging how sincerely the person believes their position to be correct.

Mitt’s offer to his fellow multimillionaires isn’t notable for its size; what is notable is that—as with me nineteen years ago—neither Gingrich nor Perry was willing to call and raise him.

 

*Those who have read my last two posts will realize that I say this without the slightest hint of irony, and that your mileage may vary.

**I’m sympathetic to GHWB on that one, by the way.  I lived and shopped in Washington Heights at the time, so we didn’t have scanners in any of our supermarkets either.  No one managing those stores would even think about making that type of capital investment.  And I shopped in stores a lot more often than the President—or even the Vice President—of the United States ever would. Those being the two jobs GHWB had had since 1981, the odds of him having encountered a supermarket scanner are about the same as [pick famous actress not related to my neighbor’s husband or filming one of her novels] showing up on my front door.

***I may have been counting Lines of Credit as part of liquid assets.

****I’m certain, in retrospect, that he would have said “done” on $100K. And given that I would have estimated the probability of losing at less than 10%, economic theory says that I should have offered the higher amount, even knowing I couldn’t cover it.  I believe this is the theory recently used by MF Global, who were dealing on direct-from-Mario-Draghi information.

*****The AP disagrees, but I find myself agreeing with Mulshine—a strange feeling in itself.

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Defining Rich IV: Corporate vs Personal Tax collection patterns 1934 to present

When I left this series in September, I had introduced the idea of looking at past tax tables as a means of understanding how We the People define rich. One specific note from history was a surcharge on top of themarginal tax rates to pay for the Great One (WWII). Obviously, that aspect of our moral character has gone right out the window.

Also for a brief period (1936 to 1943,on 6 occasions) business paid more of the income tax revenue collected than did people. I also noted that 1983 and 2009 the corporate share of income tax revenue was just over 6% of the totalrevenues (FICA included). Its lowest points. Reagan/Bush II. However, interestingly enough, Bush II did manage to get thecorporate tax collections as a percentage of personal collections(excluding FICA) up to 33.9%! Clinton only managed 26.6% in 1995. The last time we saw a ratio where corporate collections were in the30% range was 1979. In 1959 it was 47.1%. 1980 heralded the new standard of the mid to low 20% range. Of course Reagan wins thispersonal verses corporate relationship with a corporate total that is only 12.8% of the personal in 1983.

One other very interesting aspect ofour tax history using the same table is that from 1934 to 1983 when tax revenue from personal collections became less than the year prior, this was only for one year with the exception of 1945/46. Corporate revenue follows the same pattern except for 3 periods where there was a decline for 2 years running: 1946/47, 1958/59 and1961/62. From 1983 until 2001 the personal revenue is more every year than the year prior. It’s like a switch was thrown after 1983. The corporate revenue declines twice for 1 year each in this 1983 –2001 span; 1990 and 1999. Starting in 2001, the decline in revenuecollections for both personal and corporate last for 3 years running;2001 to 2003 and 2008 to 2010. Someone threw a double pole switchhere. We’ll have to wait to see for 2011.

Obviously, from this bit of history we can see a few trends at least. We have been reducing the burden on corporations as paying their share for the use of the commons. From1984 to 2000 the personal collections never declined yet thecorporate did twice. Prior to 2001, our tax tables and all their loop holes produced a fairly stable ever rising stream of revenue. However, after 2001, the stability is less in that any time there isa reduction in revenue collections, it lasts 3 times longer. Finally, except for 2005 to year ending 2007, since 1980 we think that corporations should only pay between 20 to 26% of what We thePeople pay in to our government.
I mention all the above because it isevident that more than just the marginal rates are changing and, as far as my assessment of these changes go, they are leading us to anever less stable adjusted gross income base for then calculating the tax due. That is, the base has been adjusted such that it is moresensitive to down turns in the economy. Prior to the Reagan taxrevolution, both the personal and corporate base were fairly evenlysensitive with the corporate being maybe a little more sensitive.
For 50 years (1934 to 1983) there wereonly 3 periods in which the corporate collections were less for 2years in a row and none of them were the back to back Reaganrecessions. After 1983, the base for personal taxation has changedsuch that it is not effected by any recession. However, thecorporations got relief twice. Considering that from 1934 to 1982there are only 2 recessions listed by NBER as lasting more than a year (1973/75and 1981/82, 16 months each) 1 year of less revenue does not seembad. However, for the last 2 recessions, the revenue collectionshave been less each year for 3 consecutive years for both thepersonal and the corporate collections even though the latestrecession is listed as lasting 18 months.
Withinthis 3 year pattern, we also see that the declines are greater. Fromthe high to the low for 2000 to 2003, by 2003 personal collectionsare 79% of the high and corporations are 63% of their high. For thepresent recession personal became 78.4% of the high and corporationswas 62.9% of their high. Even in 1983, when Reagan wins thepersonal/corporation differential the declines were only 97% personaland 75.2% corporations. For another perspective, that 2 year declineof personal revenue collections for 1945/46 the personal declinedonly to 81.7% of the high. During this period the corporations onlydeclined for 1 year (1947) to 72.5% of the high. In 1947, corporaterevenue collections were 48% of the personal collections. In 2000,the peak corporations revenue was 20.6% and in 2008 it was 26.6% ofthe personal revenue collections.
Obviously we made more than marginalrate changes after 1980. We changed the way the base is calculatedsuch that corporations paid significantly less as a share of thetotal income taxes and was more tied to a change in the economy suchthat corporate taxes due were less during a recession where as thepeople had no reprieve. How’s that for fairness? Then came Bush II. The base changed even more… so such that now the decline inrevenue collected lasted longer than the recession and the declineswere greater.
We do not just need to raise the rates,we need to return to a broader base. That is, when all thedeductions are done, the adjusted gross income needs to be higher. On the other hand, what we are seeing here could be the results ofthe massive shift of income up the line combined with the decreasedrates. Considering this history, the cry to lower rates and get ridof loop holes just will not work. This is a cry for flattening theincome tax, which is what we have been doing since the 60’s which wasaccelerated since Reagan. It will create a tax base that is moreunstable and thus runs even greater deficits during times of economicdecline not to mention the overall decline in total revenue collectedduring good times. And, it totally ignores the issues of equality ofpower along with the concept of the commons. You know, that We thePeople premise.

But before you get to excited aboutthis suggesting or, that I am saying that the poor need to pay moretaxes and the rich are over taxed consider the tax table from 1936,its lowest income tax bracket is 4%. This is on an income up to$4000. Let’s bring that forward to 2010 using my favorite money converter. CPI states that $4000 is now $60,400. Today’s rate for $16,750 to $68,000 is 15% instead of 4%. Of course,I like the unskilled labor and nominal GDP/capita numbers of $145,000and $275,000 respectfully.

Alright, I’ll be fair. The lowest rate in1967 is 14% for up to $1000. That figures to 2010 of $6540 CPI,$6670 unskilled and $11200 nominal GDP/capita. Though, the $4000 in1936 is $9640 in 1967 which puts one in the 22% bracket ofthat year. Using the $12000 for the top of that 1967 bracket brings us to$78,300 CPI adjusted gross income for 2010. $78,300 puts one in the25% bracket for 2010. Obviously another issue we have here when itcomes to setting up marginal rates based on historical records is howmuch the base (adjusted gross income) is effected by how the CPI iscalculated. Any way you figure it, we have been pushing the marginalrate higher and deeper into the lower end of the income pool.

Ok, onto the fondly remembered tax yearof 1936. Next post.

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Define Rich, Part III. What the tax tables of yore say.

 By Daniel Becker

Randolph Duke: Money isn’t everything, Mortimer.
Mortimer Duke: Oh, grow up.
Randolph Duke: Mother always said you were greedy.
Mortimer Duke: She meant it as a compliment.
A while ago (an understatement) I posted on the question of what is rich. The first dealt with what issues to consider in defining rich. The second was looking at the issue of getting rich if that is even what one wants to do. The “rat race”. I don’t believe most people really want to be rich. I believe most people when thinking about being rich are thinking about what it would take to remove the fears of events that would make one’s life either very difficult in a world that requires money to remove risk or drastically different from what one’s life was. I’m thinking things like losing a job, debilitating injury or illness possibly resulting in physical disability or Louis Winthorpe III.
This all ties into “The American Dream”. The “Dream” is not just an ideology of governance and social philosophy. It is also a life style and thus requires a specific level of income. I have posted on this issue also and noted just how high in income we have driven this “Dream” such that two people with bachelor’s degrees just starting life together may not be able to have it.
Now that we have entered a period where taxes are on everyone’s minds such that there is serious consensus to raising taxes, maybe we need to see what we had in the past to know what we need now. I am sure most readers are aware of Mike’s work defining what rates appear to effect economic growth the best. If I recall correctly the number for the top 1% was around 65%. I have also suggested that there is a range as to how large a share of the income the top 1% should have. That number for the top 1% is not to be above 15% and not to much below 10%.
I should also mention my postings on taxation’s purpose. Specifically I looked at taxing from the perspective of the legal profession as oppose to the economic profession. The conclusion was that there was one main reason for taxing. It is to fulfill the directive of our constitution: equality of power. It is to assure the concept of one voice one vote. If there was ever a time in our history to raise taxes in order to assure this directive it is now in the age of the Citizens United ruling. President FDR referred to the issue and those with the one voice multiple votes do to their monied power as “economic royalty”. I like that phrase and I wonder why it is not used as are retort to those who use “class warfare” as a guilt trip.
Let’s get started.


I have constructed 4 sets of data using the tax rates of 1936/37, 1945/46, 1965/67 and 2010. I chose 1936 because it is a tax rate increase after the economy had turned north based on Mikes posting. I chose 1945/46 because it is another adjustment that happens right after after WWII. I chose 1965/67 because it is the decrease often spoken of fondly. Of course 2010 is because that is where we are at.

This posting would be hugely long if I post on all 4 periods at once, so I have broken it up. Let me first and I think most importantly note that we people today have no idea just how much we were willing to tax ourselves to have the society that we now refer to as “the good old days”. Not only did we have the tax tables of 1936, that table eventually had a 10% surcharge added to pay for the war. Yes, another reason to consider the generation that fought the 1st and 2nd world wars the greatest generation. There was a 7% surcharge for the Vietnam war, though that number became less as time passed. Still, we knew that if we wanted to do exceptional things, we had to tax ourselves exceptionally. Also, the early taxation made no distinction for single or married, never mind filing joint or separate. Everyone paid the same rate. Most interestingly, with the current table, the people who comparatively get screwed are those who are married and file separately. All the rates kick in at a lower income than even those who are single. The other thing we don’t seem to understand is that all the tax rhetoric we have been hearing since Reagan we’ve heard before virtually to the word.
Andrew Mellon, Treasury Secretary 1921 to 1932 :
Generally speaking, Mellon argued that tax burdens were too high. Steep rates, he insisted, served only to stifle incentive and foster tax evasion. “Any man of energy and initiative in this country can get what he wants out of life,” he wrote. “But when initiative is crippled by legislation or by a tax system which denies him the right to receive a reasonable share of his earnings, then he will no longer exert himself and the country will be deprived of the energy on which its continued greatness depends.”
Worse yet, Mellon argued, high rates didn’t even raise money. By encouraging both legal tax avoidance and illegal tax evasion, they eroded the tax base and reduced overall revenue. Lower rates, he said, would actually raise money by spurring economic growth and reducing the incentive for tax avoidance. “It seems difficult for some to understand,” he complained, “that high rates of taxation do not necessarily mean large revenue to the government, and that more revenue may actually be obtained by lower rates.” In particular, Mellon insisted that high rates distorted investment decisions, boosting the popularity of tax-free state and local government bonds. Indeed, Mellon made these tax-free bonds a regular target of his reform attempts, but Congress resisted his plans to eliminate them.
Atlas Shrugged wasn’t even written then!  What we don’t hear much of are the original concerns and reasoning for progressive taxation. Teddy Roosevelt:
1906…We should discriminate in the sharpest way between fortunes well-won and fortunes ill-won; between those gained as an incident to performing great services to the community as a whole, and those gained in evil fashion by keeping just within the limits of mere law-honesty.
1907 regarding an income tax:…while in addition it is a difficult tax to administer in its practical working, and great care would have to be exercised to see that it was not evaded by the very men whom it was most desirable to have taxed, for if so evaded it would, of course, be worse than no tax at all; as the least desirable of all taxes is the tax which bears heavily upon the honest as compared with the dishonest man.
No advantage comes either to the country as a whole or to the individuals inheriting the money by permitting the transmission in their entirety of the enormous fortunes which would be affected by such a tax; and as an incident to its function of revenue raising, such a tax would help to preserve a measurable equality of opportunity for the people of the generations growing to manhood. We have not the slightest sympathy with that socialistic idea which would try to put laziness, thriftlessness and inefficiency on a par with industry, thrift and efficiency; which would strive to break up not merely private property, but what is far more important, the home, the chief prop upon which our whole civilization stands. Such a theory, if ever adopted, would mean the ruin of the entire country–a ruin  which would bear heaviest upon the weakest, upon those least able to shift for themselves.
At this moment, I want to mention corporate taxes. There are lessons to be learned from it’s history. I think it is a factor in understand more completely the issue Mike is focusing on: taxation and GDP growth. Wrap your minds around the fact that from 1936 to 1943 there were 6 years that corporate tax collections were greater than personal income tax collections. 1943 was the best year for this as personal income tax collections were 68.1% of the corporate tax collections. Just one year later it flips to corporate tax collections being 75.3% of personal income tax collections. In 1944 $34,543 million in total for the two taxes was collected vs 1943 $16,062 million in total.  In fact, personal income taxes remain in the mid to high 40 percent of total revenue collections from 1944 to present. The corporate share of total revenue peaks in 1943 at 39.8% and declines to hover around the 10% level with a few ventures into the single digits. Most notably 1983 the corporate share was 6.2% and 2009 it was 6.6%.
First up is our current tax table. I used the “married filling jointly” as that would be consistent with the other tables. One big rule of this series of postings: DO NOT concern yourself or me about the deductions that exist. They do not matter for this presentation and for all intent and purposes we can consider the income to have already gone through the deduction calculator and is now ready to have the tax table applied. This is because, these tables only apply to adjusted gross income.
You will notice that the table is calculated out to $,1,000,000 of income. I did this in order to keep all the tables going to the same income level. The 1936 table actually has rates for incomes up to $8 million. That is $8 million in 1936. (Using my favorite money converter that would be $301,000,000 in unskilled labor or $573,000,000 in GDP/capita.) Going to $1,000,000 in income also allows one to see what happens at the top when the rate no longer rises.
A very important concept to understand is that not every dollar is taxed at the single percentage rate as you go up the income ladder. Thus, there are two columns in my charts. The “Marginal Tax” is the additional money paid at the top of the bracket for the corresponding rate. The “Total tax” is the actual money paid up to that level. It is the “effective rate”. In simple terms, if you are at the 35% level, you 
are not paying 35% on all that you earn. Instead you are paying the amount based on your income being divided up into the number of brackets that exist. For 2010, there are 6 brackets, thus you have six different incomes so to speak.
This is what it looks like as a graph.
When the rate maxed out, I divided the range to $1 million into even parts so that the tax paid for each additional income level is the same. For the 1945/46 and 1965/67 data sets I converted the net income to 2010 dollars. I used the “unskilled labor” and GDP/cap as those are the 2 factors suggested as being the best for knowing what income equivalents are over time. The 1936 data set is converted to 1967 dollar because the numbers just get crazy. For example, a net income of $3840 is $145,000 in unskilled labor and $275,000 in GDP/cap. Though it is only $60,400 via the CPI. Which doesn’t say much for today’s median family income. It also gives us a clue as to just how much money is considered “rich”.
Next posting, I will start presenting the historical data sets. I’m still thinking about the best way to do it as what is important is the comparison among the data sets.  Maybe post just the data charts and later the graphs or maybe one data set and it’s graphs at a time. 

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Define Rich, part II: Rat Race and the American Dream

by Divorced one like Bush

There were some good responses to the first posting that I agreed with. They were, could we say, jumping the gun as to how I want to proceed, however. So, with this post I want to continue with looking at phrases/concepts/thoughts that are a part of, or were a part of any discussion regarding “rich”.

Have you missed the phrase: Rat Race?
Wonder why we ask: Is the American Dream dead?
Could it be that in an economy where “rich” is not or will not be defined, the race is won and the dream obtained? After all, we’re all rich now! Sodahead specifically asked the question.

We have polls regarding the Dream. From the group: Change to Win, the 2006 American Dream Survey:

A majority of American workers feel both the country (63%) and the national economy (63%) have gotten off on the wrong track. Just 26% of workers say the country is headed in the right direction, while 28% say the national economy is headed in the right direction.

The most widespread serious worries of American workers today include the prospect of not being able to afford health care when they need it (a serious concern for 77%), not having enough money for retirement (77%), losing their health care benefits (72%), not being able to keep up with bills (69%), and having their standard of living slip further and further (68%).

When asked the open ended question of what the American Dream means to the them, respondents say it means having a good job and being able to make a comfortable living (37%) while notably, almost no one mentions being wealthy or affluent (1%).

From New American Dream.org 2004 survey report:

More than 4 in 5 Americans (85%) say that our society’s priorities are out of whack.
Nearly all Americans (93%) agree — more than half agree strongly (52%) — that Americans are too focused on working and making money and not enough on family and community.
More than 4 in 5 Americans (83%) agree that they wish they had more of what really matters in life.
Less than 3 in 10 say that having a bigger house or apartment (29%) or nicer things (16%) would make them much more satisfied.

In this survey is a chart of phrases asked to be rated in how well it describes the American Dream and importance for society on a 10 point scale. They report the percentage that rated each phrase at 8 or higher. The following are significant for this discussion:
“To consume or buy what we want”. Only 55% said it described the Dream and 49% said it was important.
“Achieving an affluent or wealthy life style”. Only 49% said it described the Dream and 44 % said it was important.
These are low numbers compared to the other phrases.

Thus, between these two surveys, the idea of getting rich so that you can consume as you please is not a big part of the Dream. In fact this survey found:

Over the past 5 years, nearly half of Americans (49%) say that they have voluntarily made changes in their life which resulted in making less money.
What kinds of changes have Americans who are downshifting made? One in three Americans (33%) say they have ”quit working outside the home” and more than 1 in 4 say they have either changed to a lower paying job (28%) or reduced their work hours (26%).

That brings us to the phrase: Rat Race.

A rat race is a term used for an endless, self-defeating or pointless pursuit…The rat race is a term often used to describe work, particularly excessive work; in general terms, if one works too much, one is in the rat race.

Now, consider that there were 38.8 million hits for “is the American Dream Dead” but only 3.98 million hits for “rat race”. “Houston, we have a problem.” People know what the American Dream is and they know we ain’t livin’ it, BUT, they have no idea what they have been living.

In that 3.98 million hits, only 1 MSM article came up early regarding “rat race” and how to get out of it. Early was page 2, second listing. Contrast that with the dead American Dream search having the first 3 hits being MSM articles.

This is how the article from MSN Money Staff, 7/20/07 begins:

Looking to get off the paycheck-to-paycheck treadmill or to drop out of the rat race altogether? Here’s what you’ll need: a solid plan for how you’ll spend your time and a way to either earn dramatically more or spend much, much less.

This is not an impossible dream. In 2004, 7.5 million U.S. households had $1 million in assets, not including their homes. The number of people worth $5 million has quadrupled in the past 10 years and numbers nearly 1 million.

So, the way to get out of the race is to win the race? Obviously they have not read what Americans believe the American Dream is. Or, could this article be getting at just how expensive it is to have the American Dream? Or, are they supporting the impression from the surveys that the chances of getting the Dream are slim and less so for the next generation? After all, what is 7.5 million households compared to a projected 110 million by 2010?

If we can not conceptualize (though we used to) what it is we are doing while having a feeling that we don’t like what ever it is we are doing because it is not part of the American Dream, then how can we define rich? However, if you are rich, and you make money from money, could there be any better environment than to have the masses unable to recognize their dilemma? Talk about putting your capital to work! Just as there is a campaign to not define rich, there has been a campaign to make the American Dream synonymous with the goal of making money. For instance, the purpose of business was not always defined as making money, however that is the pat answer returned today. (I’m going to write about this too some day.)

Just read that MSN article again. Nothing in there gives the reader permission to simply down size, to get off the rat race. No, you have to make sure you have enough money. They even suggest doubt about your being able to be happy with less. And, in the end you may already be rich. There closing sentence:

On the other hand, you may not be as poor as you think. Check out GlobalRichList to get a different take on how you compare with others.

The goal is to make money we are told. You know, the rhetoric about the lazy people, those wanting more of the American Dream than they are willing to work hard enough for? You don’t want to be like them! Yet, the pursuit of this goal is the incarnation of the concept “Rat Race”.

We have had our ideas about our purpose in and of life reduced to the concept of “rat race”, while having the concept removed from our daily lexicon so that we can’t even voice what we are experiencing. Our American dream has been reduced to “an endless, self-defeating or pointless pursuit” while we have been losing the words to voice the experience. Did you know, that the reason we can not remember our very early years is because as infants, we do not have use of language and thus can not form memories. You need words and their understanding in order to structure and reason your life out.

Defining “rich” is part of understanding the American Dream. The Dream is a life style within the framing of equality of power. The American Dream is the goal. The goal has always had a dollar amount tied to it. Because the Dream cost money, it is vulnerable to manipulation by those of unequal power: the rich.

To be continued.

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Define rich!!!!!!!!

(I’m broadening the discussion now.)
by Divorced one like Bush

Define rich. Define rich! Define rich?

That’s the come back every time the issue of raising the income tax on the rich come up. What is unsaid is: Go ahead. Define rich. I dare ya! (Triple dog dare at that.)

Fine. I’ll accept the challenge. But, first understand that I accept the challenge because having a definition of “rich” is needed if we are going to fix the money from money economy. We have to ask: When is enough, enough? We have to take the responsibility of having determined what enough is, if we are going to return to the ideal of our democracy. The ideal of equality of power. This ideal was discussed in my postings (3 of them) on taxation.

I think this nation used to know when enough was enough. We used to know what rich was. It was a life; as in “pick a life, not a job”. It was an ability made capable by the amount of money managed (not flowing) through one’s hands. That it was a life meant we did not fall for the rhetorical trick of: Define rich! I dare ya. The trick is that the question is asked in reference to defining levels of income at which a specified percentage of taxation will take place. It is the infamous black and white trap when we all know we live in a life that is the spectrum of color. Cross this line you pay, don’t cross it, then you don’t pay. As with all dares, there is a threat. The threat for the rhetorical “define rich” dare is that the moment a number is chosen, the one doing the daring will retort with a life example of the chosen number that under the life circumstances retort might not be considered rich.

Back when we knew what rich was, we had an income tax based on a spectrum of rich. In fact, something I quoted in my tax series confirms that we knew what “rich” was:

There was another agenda at play as well in the early years of the federal income tax: the desire to use progressive taxation as a way to “ stave off more radical calls for industrial democracy.” This explains why even some high-income Republican groups supported the Sixteenth Amendment. Andrew Mellon, Secretary of the Treasury in the 1920s and one of the wealthiest Americans, “ believed that keeping tax schedules graduated (albeit flatter) would mitigate radical demands for restructuring the capitalist system.”

Even the rich knew what rich was.

Let me say, for me wealth is not the rich I’m talking about. Wealth is another issue that should not be brought into the discussion of “rich” related to an income tax. It get’s thrown in as another rhetorical trick, the trick being that one will think about a dollar amount of wealth and then think how much money it took to get that wealth ala income. But, wealth is accounted under the asset category, not income.

Professor Mankiw posted in 2006 about a study that defined a level of rich world wide based on wealth which I think has a presentation ripe for rhetorical trap making. He quotes:

The research finds that assets of $2,200 per adult placed a household in the top half of the world wealth distribution in the year 2000. To be among the richest 10% of adults in the world required $61,000 in assets, and more than $500,000 was needed to belong to the richest 1%, a group which — with 37 million members worldwide — is far from an exclusive club.

So, from a global perspective, if you have net worth of more than $61,000, you are rich.

Really? Thirty 37 million members world wide on a planet of 6 billion is not exclusive? $61,000 of assets should make us all feel rich? The message (and I am not interpreting that Profressor Mankiw’s posting suggests any qualification) is that we should all feel equally wealthy and thus rich. Can you see how such a presentation could be used as a rhetorical trap in determining “rich”. So, let’s not go there. “There” is for the discussion of the estate tax. Besides, once the income has been turned into an asset, it’s kind of too late to worry about taxing the income. No?

Also, we are talking the United States of America. Not Zimbabwe. (See the above issue.) I know there are children starving in Africa. We have the same here, it’s just that the income needed here to not have a child starving is higher. Purchasing power parity and all that. Though, if we would be adult about the issue of “rich” and define when enough is enough, we would be able to do more for such people as there would be more left for them.

We have lost our definition of rich and I believe it was done intentionally. If you are rich, then what better camouflage is there than to undefine “rich”? And, what better way to undefine “rich” than to have an argument accepted that “rich” can not really be defined? AND, once you can’t define rich, well then hey, how can you single out anyone number as a line for having to pay a higher percentage of tax on their income? Thus, we should all pay the same percentage and thus obtain our constitutional nirvana of all man is created equal. Throw in a little pity play as in the “rich are paying most of the taxes”, (funny how those complaining about how much the rich pay in taxes seem to know what “rich” is) present your candidates as the every-man or every-woman, salt of the earth, blab, blab, blab to reinforce the perception that this is all about constitutional equality and BINGO, you get to convert life from an economy that worked for society to a society that works for an economy. And as presented, once you get beyond “enough”, all you have is to have more:

Wealth confers power beyond its consumption value. This power is economic, social, and political. The economic power of the rich derives primarily from their ability to use their wealth to invest in enterprises that employ thousands of people and can dominate large sectors of the economy.

Yes, they are talking wealth. However, as I noted, this is after the rich bought their stuff to make them happy. Now they are just accumulating power.

We need to define “rich”. We need to be adult about this and take the responsibility for understanding the interplay of society and an economy within our form of democratic governance. Personally, I think we will find that defining rich for our purposes is rather easy once we stop answering the rhetorical dare of: Define rich?

For this discussion “rich” is a life classification. The classification is consumption determined, the amount of which is a function of energy expended (ie: physical labor/intellectual labor), work performed (ie: blue collar/white collar) along with energy conserved (freedom), work diverted (power). This aspect of life is not about what the individual finds satisfying. That is another rhetorical trap. We all know of those who are fine with just hitch hiking through the galaxy and would consider them self rich for the memories. The life aspect needed for determining “rich” for the purpose of taxing is the aspect determined by the structure of the society one lives in. For us, that structure is idealized in the phrase: The American Dream. That phrase is the socially understood goal and that phrase is underscored by how much money your hands manage.

Classification as in “class warfare”. Consumption as in “autonomous consumption”. American Dream as in more than autonomous consumption. All three a function of the amount of money managed by one’s hands.

To be continued.

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