Income distributions and misleading poll questions (#OWS)
Disingenuous, pseudo-quantitative arguments piss me off.
In this recent Bloomberg View article entitled “Making the rich poorer doesn’t enrich the middle class,” Caroline Baum argues that middle class people would rather get more money than take away money from rich people. From the article:
Polling by the Pew Research Center shows that people aren’t interested in taking money from the wealthy. They just want a chance to get rich themselves.
But that’s a misleading question. It seems like a zero sum game when you put it that way, equivalent to something like, “Would you rather gain $100 or have a rich person somewhere lose $100?”.
But if you pose the question differently, and more in line with actual numbers, not to mention contextualized to reality in other ways, then you’d probably get the opposite.
Let’s take a look at wealth distribution from 2007, which I got here:
Let’s just say we’re being extreme and we take away all the wealth of the top 1% and give it to everybody equally (say we even give back some of it to those top 1%). That would mean that 34.6% get flattened out to 100 pots instead of one, which means that each of those percentiles gets about 0.35% more than they used to have. The middle 20% would grow from 4% of the overall wealth to (4 + 20*0.35)% = 11%. That’s still a lot less than 20%, but the wealth of the middle 20% is still nearly tripled by just this one percent re-distributing.
Said another way, it’s not tit-for-tat at all.
If we asked someone in the middle class which they want more, a 1% increase in their wealth or a top 1%’er to lose 1% of their wealth, then that might be very different. Consider the political influence that 1% represents, at the very least. Consider the fact that 1% of that person in the middle 20% is 173 times smaller than for the top 1%.
It’s still not fair, though, because the middle class is so squeezed on necessities like food, housing, education, medical expenses, and child care, that they can’t afford even a 1% loss. What if you took those out?
If you go even further and ask someone in the middle class which they want more, a 1% increase in their discretionary income or a top 1%’er to lose 1% of their discretionary income, then that might be very different still. I haven’t been able to find a similar graphic to work with to see the discretionary income distribution, but rest assured it’s even more unbalanced.
Caroline Baum, would you care to cover those questions on your next poll to the middle class?
mathbabe 
I’m not sure how your example redistribution supports your argument. Nor do I think you present it fairly. You take away ALL of the wealth of the top 1% and then give them back 0.35%. By my calculation, the bottom 40% now get 14.2% which works out to …. 0.355% per percentile. You have now moved the top 1% to the bottom 1%. Actually, it’s easy to see mathematically this will always happen as long as the receiving groups don’t have negative net worth before redistribution. Your right that this isn’t tit for tat. For every $35 that a 1%er loses, a person in the middle 20% gets $0.35. I really don’t think most middle class Americans hate the wealthy enough to consider that reasonable.
In fact any kind of downward wealth redistribution is probably going to have similar ratios.
The (ultra) rich lose dollars so the middle class can get pennies. On a quality of life perspective, you might be able to argue this would still be a good thing; but it seems harder based solely on the numbers.
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Mathbabe,
See my comment on your article at Mike Norman Economics
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Caroline Baum, would you care to cover those questions on your next poll to the middle class?
OR how about,we all agree , yes, 99% and !% that Federal income taxes are unfair.
So, why not make it fair.Reduce Federal Income Taxes to zero (0).
This will ,of course, raise the question,as , “President Obama said,”You can’t raise revenues by lowering taxes unless you get the money from somewhere else.” ?
YES, JUST COLLECT INTEREST ON OUR OWN MONEY, INSTEAD OF TAXES ON OUR PEOPLE !
Read in full:”Don’t End The Fed, Amend The Fed”
http://bit.ly/MlQWNs
Read what William Black has to say about banks and Michael Hudson about compound interest (excerpts are in the article).
An explanation of where we went wrong with a solution to how we can fix it.
Challenge it.
Improve it.
Turn it into :
“The Occupy Wall Street Manifesto”
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I like the point you make, but I wonder if total wealth is the wrong thing to measure. As you mentioned in a recent post, a statistic that better reflected risk would be more substantially connected to a person’s living conditions. There is certainly a huge correlation, e.g., people in the top 1% do not need to worry about being impoverished by a sudden illness or being unable to afford a necessary treatment, but perhaps the dialogue should turn away from absolute wealth distribution and more toward mechanisms for redistributing (or more correctly, mitigating) risk more fairly.
I guess my point is that not only is the poll question intellectually dishonest, but it shifts the dialogue to the wrong subject. Certainly wealth inequality is a big deal, but I think that is mostly because of how it affects people’s ability to live in reasonable comfort and safety.
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Agreed.
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Cathy,
I did look at Gross Adjusted Income from IRS returns – The data can be found at http://www.irs.gov/taxstats/indtaxstats/article/0,,id=96981,00.html. The data includes tax credits (which are termed deficits in the files) Thus you will see that in 2009, 1.8% of the tax returns had ‘0’ AGI and they received an average of $79,000 back from the IRS as tax credits.
If we were to re-institute a 90% tax bracket at a single person income of $250,000 (keeping all other tax brackets unchanged) and give back the revenue resulting from this tax bracket as a tax credit to every man woman and child, the CEO/lowest paid worker ratio would go back from 600:1 (where it is today) to 25:1 where it was in the 1950’s and 60’s when there was a 90% tax bracket
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That was an interesting exercise.
And it would have been even more interesting if the author had considered the bottom 40%, (which usually is completely forgotten, because of the generalized focus on the so-called middle class). For them, your hypothetical wealth redistribution policy would multiply their wealth a tiny little bit more than just 3 times.
Together, if memory serves, the bottom 40% and the following 20% make 60% of the population…
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Thirty years ago my friend’s husband began his investment banking career and within three years paid for a house plus seven acres in one of the wealthiest NJ suburbs. Meanwhile my husband and I needed to take out a mortgage to buy our home, auto loans to pay for our used cars, and student loans to help pay for our three children to attend college. My friend invests probably 99.9% of his compensation packages and salary because he has nominal daily expenses. Yes, he was smart in paying off his house in two years but it only took one year of bonuses to pay for it. When my husband was downsized to boost a future ‘too big to fail’s’ bank quarterly profits to insure the bankers and executive obscene bonuses, we used all of our ‘discretionary savings’ to pay for our daily necessities. One child left college for a year to relieve us of paying her living expenses and another child searched for almost two years to find a job after graduating with a B.S. with a science major. My friend’s husband leaves his job at a ‘too big to fail’ bank with a huge golden parachute even though he is one of the bank’s scapegoats and takes two years off to travel the world. Now, he’s back at work making millions per year; by the way his office is located in one of those tax haven islands to avoid paying US taxes.
There is a HUGE difference between the income of the top 1% and the perks that go along with their jobs then the bottom 99% particularly the lower five tax brackets. If you took away 1% to 10% of their income through increased income taxes and capital gains taxes, they would not even notice it except for many of their massive sense of entitlement and privilege. It’s about time that income redistribution stopped occurring ONLY for the top and it’s about time that we stop acting as everyone else owes them something for helping create their wealth. After all if we all suddenly disappeared, who would do the work that creates their wealth and enables them to survive on this planet. Finally, that 1% to 10% increased taxes on the rich would not only help the middle class and poor but help decrease the federal deficit. Personally it’s time that the lower 99% realize that the rich can’t make it without the rest of us and time to stop acting like dependent or co-dependent children.
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