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Wealth Inequality

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Fair comment....Nor do most of the wealthy draw much of a salary, if they can bury it somewhere else and claim it as an expense...I think the asset one is a little more relevant.
 
Joseph Stiglitz, Paul Krugman, and Steven Durlauf participated in a panel moderated by Branko Milanovic. Discuss
with "The French economist Thomas Piketty his new book, Capital in the Twenty-First Century at the Graduate Centre at the City University of New York

https://www.youtube.com/watch?v=heOVJM2JZxI
 
http://bonddad.blogspot.com.au/2014/04/the-rental-affordability-crisis-is-real.html

Probably going to become relevant to Australia over the next few years as real wages at best stagnate and most likely for lower income earners turns negative as it has in the USA

According to data from the U.S. Census, half of all renters, and 83 percent of renters with incomes under $20,000, paid more than 30 percent of their incomes in rent in 2011.

Instead, the greatest decline in affordability has occurred amongst low-to-middle income households. [For example, i]n Atlanta, the share of households with incomes between $20,000 and $35,000 in year 2010 dollars who paid at least 30 percent of their incomes in rent rose from about 20 percent in 1980 to more than 80 percent in 2012....Even households in the $35,000 to $50,000 real income tier have experienced declining affordability rates, albeit not to the same degree....However, the highest income groups in the data – households making $50,000 or more in real terms””have experienced little decrease in affordability.

A recently released study by the Harvard Joint Center for Housing Studies noted that "Between 2000 and 2012, real median rents rose nationwide by 6%. However, over the same time period, the real median income of renters fell by 13%."
 
Some interesting reads

http://www.voxeu.org/article/human-capital-and-income-inequality

Personally I think while dividends and income producing assets provide higher growth than wages then inequality will only get worse. Unless you have teh wages share of GDP increasing faster than business income there's really no easy way to stop the growth of income inequality.

http://www.theglobalist.com/want-to-fix-income-inequality-relink-wages-to-productivity/

Supposedly we already have this with enterprise bargaining?
 

Yep, and wages share has been precipitously declining. Even if it were to rise, asset distribution is more extreme than incomes. The rich own the most assets by proportions much greater than relative incomes. The relationship is positive. Rich people with assets tend to be better paid. Hence, even if wages share increases, it will have to increase a lot to offset the value of asset ownership already embedded. Further, the distribution of wages will have to move to favour those with few assets for any realistic chance for this route to work. My point: it's going to take more than lifting wages share to achieve decent equality because we need to consider distribution of asset ownership together with the distribution of current personal income.

Wages share will not be able to grow to 100% in a standard economy. Although that's a silly scenario given what goes on in GDP, if wages share gets too high, companies become less profitable...and the markets adjust. This acts as material resistance to wage share getting beyond, say, 60%.

History has examples of successful paths to re-equalizing wealth. This include heavily progressive taxation policies. The US actually has the best examples of this. The more nasty scenarios where this is also achieved includes high inflation which erodes the value of assets, possibly rendering them nearly worthless and hence brings the equation back to current wages with nominal contribution from embedded assets. Then we can get nuts and talk about communism and so forth which achieved it. In the extreme, total confiscation of all assets and forcing labour for equal incomes would lead to the maximum attainable wages share of incomes and achieve equality. But who'd actually want that?

Love ya work.
 
overall in agreement, but more than (or more exactly, on top of) low wages being smashed, the US example would addthe complete anihilation of the middle class.
Should this happen in australia, the wages of the current middle class would collapse and so the vast majority of IP owners might then need to release their assets -> decreasing IP values.
In australia, assets = real estate
the wealth inequality in Australia could very well decrease drastically leading to a leveling by the bottom: all poorer but for the few really rich 1% or so who are more diversified and able to access the international markets.
Taxation?
When people at 80k equivalent are taxed at 45%, seriously, this is not progressive taxation, this is punishing taxation.
In a nutshell, my view is we might see a rebalancing to the lowest target, with an overall decreasing or stagnating wealth with crashing of the middle class concept
This could also mean the end of the 6 figures income tradies and a few other australian anomalies
 
DeepState said:
.....My point: it's going to take more than lifting wages share to achieve decent equality because we need to consider distribution of asset ownership together with the distribution of current personal income.
Click to expand...

Personally I think a broadly based progressive land tax with pretty much no exemptions is one way forward. In most countries a lot of wealth is stored in housing, especially land. Wealthy people generally own land in high value areas, with the extremely wealthy fighting over the trophy properties in each city. The current tax free status of the primary residence benefits the rich way more than the middle class, and the poor generally don't own property so miss out on this giant tax lurk. The alternative is to tax imputed rent on the primary residence, but I think a land tax is far easier to administer.

broadening the GST would also help, as a lot of the GST free services are where wealthier people spend a greater share of their income on.

Getting rid of the half CGT, or at least making it a reasonable period of time to encourage long term investing rather than speculative activities would also be good. I've yt to hear a reasonable explanation as to why a poor person who earns $200 in interest pays full tax on it, but a rich person who is able to restructure their finances / business and receive capital gains is able to halve their effective tax on it. Shouldn't all sources of income be treated the same way?

We might also have to look at inheritance taxes.

All the above requires strong political and economic leadership, which is sadly lacking in Australia.
 
qldfrog said:
When people at 80k equivalent are taxed at 45%, seriously, this is not progressive taxation, this is punishing taxation.
Click to expand...

Actually the 45c rate kicks in at $180K

To give you an idea of current income distribution in Australia.

People tend to over estimate the number of people in the middle income distribution and and underestimate at the lower and upper extremes, so while this misunderstanding is around it makes it hard for the public to actually grasp the issue.
 

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sydboy007 said:
Actually the 45c rate kicks in at $180K
Click to expand...
I was taking our finance minister figures on bracket creep as to what we do not want to end up with

even if you consider the super that you may never be allowed to touch and the 10% gst you pay on most of what you buy + medicare levy +forced membership in a private healthfund, I seriously believe a person on 80k in Australia is actually not far from the 50% actual taxation rate

I know neither my wife or I have any interest to slave under current taxation rate and as we can afford it, we both work part time aka slow move to "active pre" retirement.
In both case this is costing Australia but I have calculated interest in having a life and managing my assets.

Not to forget when throwing radical taxation "solutions"
I come from France and I saw the results of both debt and "tax the rich" attitude
 

1. Agreed. And it's hard to take your house to an offshore tax haven. I guess there are concerns about getting independent values. It's like my council. I am always puzzled by whatever valuation they place on my land and improvements for the purposes of rates.

2. Agreed again. With stickiness of wealth across generations, perhaps this might be a way forward. But these taxes tend to be readily circumvented.

3. Agree yet again. Question for you....does the presence of inequality correlate with loss of political will to rectify it?

Best.
 
Wages in my experience are commensurate with experience, skill set, demand or hours worked. It can only be that the higher skilled, the greater experienced, the in-demand and the long hours worker get more money. The mining boom saw a large demand for both skilled and unskilled workers to work long hours. Most of these workers could double or triple their yearly income.

Another issue here is that wealth is comparative (like most human issues - good v bad, beautiful v ugly) so rich is only so because poor exists. All comparative my friends, all comparative.
 
DeepState said:
3. Agree yet again. Question for you....does the presence of inequality correlate with loss of political will to rectify it?

Best.
Click to expand...

I think it's partly due to the decreasing share that wages receives. The post war years up to the 70s oil shocks were a bit unique in post industrial society where the share of wages increased for a lot of workers, which allowed the consumerist middle class to develop.

Now we're back to income from wages for most people barely keeping up with inflation, while those who hold assets and can extract economic rents are receiving an increasing share of the economic pie.

Globalisation would be one of the causes. Every year there's more and wore workers available, and most of the extra workers can have decent lives on monthly wages that probably don't equal the taxes most of us pay each month.

The tax system is also geared to penalise hard work and thrift. Incoem taxes are relatively high still, there's no tax sheltering for interest income. Compare that to the tax free status of the family home, which leads to speculation and over investment in property, combined with NG at a persons' marginal tax rate, half CGT on sale of the asset.

How we makes changes that don't penalise entrepreneurs and true investment, but does stop the bias towards rewarding capital over labour I'm not too sure. There's plenty of good stuff from the Henry Tax review that was never implemented, and by the sounds Hockey is making there'll be plenty of good recommendation in their commission of audit that will also be ignored.
 
http://www.theguardian.com/commentisfree/2014/apr/28/britain-plutocrats-landed-gentry-shotgun-owners

Not the full article but the parts that show what a plutocracy the UK is turning into. We wont be far behind.

A few days after it was revealed that an NHS group is considering charging patients for the crutches, walking sticks and neck braces it issues, we discovered that David Cameron has intervened to keep the cost of gun licences frozen at £50: a price that hasn't changed since 2001.

The police are furious: it costs them £196 to conduct the background checks required to ensure shotguns are issued only to the kind of dangerous lunatics who use them for mowing down pheasants, rather than to the common or garden variety. As a result they – sorry, we – lose £17m a year, by subsidising the pursuits of the exceedingly rich.

Three days later – on Friday – the government announced it would raise the subsidy it provides for grouse moors from £30 per hectare to £56. Yes, you read that right: the British government subsidises grouse moors, which are owned by 1% of the 1% and used by people who are scarcely less rich.

Before examining the wider picture, let's stick with the shooting theme for a moment, and take a look at the remarkable shape-shifting properties of that emblem of Downton Abbey Britain: the pheasant. Through a series of magnificent legal manoeuvres it can become whatever the nation's wealthy want it to be.

When pheasants are reared, they are classed as livestock: that means the people who raise them are exempt from some payments of value added tax and certain forms of planning control, on the grounds that they are producing food.

But as soon as they're released they are classed as wild animals. Otherwise you wouldn't be allowed to shoot them. But if you want to re-capture the survivors at the end of the shooting season to use as breeding stock, they cease to be wild and become livestock again, because you aren't allowed to catch wild birds with nets.

If, however, pheasants cause damage to neighbouring gardens, or to cars, or to the people travelling in those cars, the person who released them bears no liability, because for this purpose they are classed as wild animals – even if, at the time, they are being rounded up as legal livestock.
 
Takeaway for me from Piketty is: be a capitalist not a wage earner as capital *always* (apart, apparently, from an "aberration" of ~20 years around WW2) increases faster than GDP..
 
Huskar said:
Takeaway for me from Piketty is: be a capitalist not a wage earner as capital *always* (apart, apparently, from an "aberration" of ~20 years around WW2) increases faster than GDP..
Click to expand...

And the unescapable mathematical consequence of interest rates higher then economic growth is wealth concentration.

If you don’t want extreme wealth concentration in our society you either have to reform money as we currently know it, to work without a ‘positive’ interest rate component or accept growing redistribution of wealth via government/philanthropy etc transfer system.
 
Nature is survival of the fittest.


Society is about co-operation, each playing their own role, raising our chance of surviving the challenges nature provides.


Modern society showing greater improvements as societies co-operation increases, thus improving chances for more with opportunity achieving their longer term potential.

Retained is problem of individuals losing their focus resulting in short term gains reducing longer term benefits.


Today in our society "extreme wealth concentration" is less problem than gap between bottom and top widening.



Sooner or later, taxation is applied to reduce width this gap, ensure more -perhaps a majority, rest somewhere closer to centre.
 
polpak said:
Today in our society "extreme wealth concentration" is less problem than gap between bottom and top widening.
Click to expand...
Maybe a reason is the (employer?, Liberal government?) perception of someones worth.

Sooner or later, taxation is applied to reduce width this gap, ensure more -perhaps a majority, rest somewhere closer to centre.
Click to expand...
As I posted earlier and what people seem to not get is that everyone cannot be wealthy because far less would need to work and it is the millions upon millions of comparatively lower income workers that assist the wealthy (rents, low wage, consumption) and the country (TAXES, fees, charges, levies etc.).
 
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