Why more Americans pay no income tax

[CycloWizard]

Likely true. Life isn't fair.

So your argument is that, despite my being treated unfairly, I should just suck it up and keep paying for everyone else? Piss off.

Nonsense. Most of what you are is due to safe food, clean water, electricity, roads, safe neighborhoods, and all the other things that not only gave you the free time to gain an education (as opposed to spending your day gathering berries), but helped ensure you'd survive to adulthood so you could actually make something of yourself.

You want to give our society credit for things that have been around since the time of the Roman Empire, then hang that millstone around my neck as an infinite debt which can never be paid. The problem is that the debt was paid up front when the government started taking money from me when I started working at age 12. The problem with your thought process is that, under your system, I will always be penalized for utilizing resources which I have already paid for. Society exists to serve the needs of its members. If you believe the opposite, then we are at an impasse because you believe that I am a slave to society. If you care to address this point, I will be happy to address the other points you made, but this is the fundamental disagreement as I see it.

I posed this to you in some detail in the thread you're now avoiding.

Sorry that I travel on weekends and threads fall off the front page or accrue pages of posts while I'm gone.

 

[Bowfinger]

So your argument is that, despite my being treated unfairly, I should just suck it up and keep paying for everyone else? Piss off.

So you're adopting the purported "liberal" philosophy that life should be fair to everyone?

It is what it is; there's really no point in obsessing about it. Bear in mind that although you pay more than many, there are plenty of people who pay far more than you do.

You want to give our society credit for things that have been around since the time of the Roman Empire,

So have taxes.

If today's opportunities arose from Roman Empire-era infrastructure, one might be able to argue today's taxes are unreasonable. Unfortunately for taxpayers (though fortunately for 21st century mankind), there are few opportunities these days for gladiators or chariot drivers. One doesn't make a future in biotech or computers using infrastructure from the Bronze Age. We must continuously invest in our infrastructure so it provides the foundation for tomorrow's opportunities for success instead of yesteryear's.

then hang that millstone around my neck as an infinite debt which can never be paid. The problem is that the debt was paid up front when the government started taking money from me when I started working at age 12. The problem with your thought process is that, under your system, I will always be penalized for utilizing resources which I have already paid for.

Our real fundamental difference is I don't see it as being penalized. TANSTAAFL. It's the dues I pay for having access to all of the wonderful benefits and opportunities America offers. In my mind, it is an acceptable price. Were it not, I'd look at moving elsewhere.

Society exists to serve the needs of its members. If you believe the opposite, then we are at an impasse because you believe that I am a slave to society. If you care to address this point, I will be happy to address the other points you made, but this is the fundamental disagreement as I see it.

I agree, society does exist to serve the needs of its members. In my view it does so -- imperfectly to be sure -- by surrounding me with the resources and opportunities I need to be healthy, happy, and prosperous. That costs money, however, and the taxes I pay are the fair return on society's investment in my success.

Sorry that I travel on weekends and threads fall off the front page or accrue pages of posts while I'm gone.

You posted in many other threads while these two were still on the front page. No matter, you're certainly under no obligation to reply. I was hopeful you would though. While we disagree, it is far more interesting to have a discussion with someone who is articulate and can offer coherent arguments instead of the usual vapid sock puppets whose intellectual depth is measured by the paper weight of the bumper stickers they parrot.

 

[CycloWizard]

So you're adopting the purported "liberal" philosophy that life should be fair to everyone?

It is what it is; there's really no point in obsessing about it. Bear in mind that although you pay more than many, there are plenty of people who pay far more than you do.

And I think that's wrong. I paid about $40k in taxes last year after it was all said and done. A huge chunk of that money went directly into the pockets of people who, like me, have access to infrastructure and protection of the law. The problem is that they are using all of these things and, not only not paying for them, but they are being paid for their troubles. That is the problem here. You want me to pay taxes for infrastructure? Fine and dandy. You want me to pay more than someone else because I make more money and, one could argue, utilize more of these commonly-available resources? I might be able to swallow that. You want me to pay a metric buttload while other people pay absolutely nothing, then turn over even more to subsidize their lack of contribution? Now we have a problem. You can argue that life isn't fair, but this is unjust, which is a lot worse. If I go to Vegas, I want the dice to be fair. If I go to pay my taxes, I want the laws to be just. Justice is never served by forcefully taking my money and handing it to someone else. I can do that of my own free will if I wish, but using the government as an agent to accomplish that is unequivocally unjust.

If today's opportunities arose from Roman Empire-era infrastructure, one might be able to argue today's taxes are unreasonable. Unfortunately for taxpayers (though fortunately for 21st century mankind), there are few opportunities these days for gladiators or chariot drivers. One doesn't make a future in biotech or computers using infrastructure from the Bronze Age. We must continuously invest in our infrastructure so it provides the foundation for tomorrow's opportunities for success instead of yesteryear's.

But the vast majority of taxes aren't paying for infrastructure improvements.

Our real fundamental difference is I don't see it as being penalized. TANSTAAFL. It's the dues I pay for having access to all of the wonderful benefits and opportunities America offers. In my mind, it is an acceptable price. Were it not, I'd look at moving elsewhere.

But the price isn't fixed. On a whim, my taxes can double or triple with no additional benefit. I'm hardly a policy expert, but thinking about this for 30 seconds leads me to at least two superior methods for collecting taxes to pay for infrastructure:
1. collect based on use (i.e. pay tolls for miles driven - easily done without tracking my every movement by simply collecting it with property tax every year based on the mileage on the car), or
2. collect an equal amount from everyone (based on the idea that everyone has equal access to infrastructure, which is likely untrue, making #1 the obviously superior alternative).

I agree, society does exist to serve the needs of its members. In my view it does so -- imperfectly to be sure -- by surrounding me with the resources and opportunities I need to be healthy, happy, and prosperous. That costs money, however, and the taxes I pay are the fair return on society's investment in my success.

The problem is that there is no fair return on human investment. To think that you are due a return because I drove down your street on my way to class every day is slavery of the individual to society. When society imposes a burden of this type on certain individuals but not others, the system is unjust. Will you demand cash from non-taxpayers who want to drive down your street? If not, then your argument is nothing but an appeal to emotion: you simply feel sorry for one segment of society and use that as a weapon against the rest. My paying taxes is my stock in society, not the other way around. Those who have no stock in society keep receiving dividend checks from my checkbook. They are free to run society into the ground because its decreased value has no bearing on their bottom line.

You posted in many other threads while these two were still on the front page. No matter, you're certainly under no obligation to reply. I was hopeful you would though. While we disagree, it is far more interesting to have a discussion with someone who is articulate and can offer coherent arguments instead of the usual vapid sock puppets whose intellectual depth is measured by the paper weight of the bumper stickers they parrot.

I will try to get back to that thread. I have been traveling a ton and miss a few days here and there. If a thread has a hundred new posts since my last one, I usually give up and move on.

 

[HomerJS]

This thread should have been locked due to lack of comment from the OP but since it's still here I'll make the OP feel better with the following...

http://thinkprogress.org/2010/04/06/exxon-tax/

ExxonMobil paid no federal income tax in 2009

 

[blackangst1]

This thread should have been locked due to lack of comment from the OP but since it's still here I'll make the OP feel better with the following...

http://thinkprogress.org/2010/04/06/exxon-tax/

http://www.oil-price.net/en/articles/How-Exxon-paid-zero-tazes-in-2009.php

According to a report by the Government Accountability Office (GAO), 2008, two out of three US companies paid no federal income taxes from 1998 through 2005. The report had covered 1.3 million corporations in the US with collective sales of $2.5 trillion.

So to the important question: Is it illegal to do so? No, not at all, in fact, it's well within the purview of law. Under Net Operating Loss Carry forwards (NOLs), if a company makes a profit of, say, a million this year but incurs a loss of a million the next year, the previous year's loss could be tallied against the gain. Thus a company could get a zero tax liability in the US. It's the same story in the case of foreign tax credit too.
The foreign tax credit is applied to situations where the company has already paid taxes elsewhere in the world. This is done by the IRS to prevent double taxation for corporations. Thus there is a choice of tax credit or deduction against the US taxes. If a corporation pays over the US corporate rate of 35%, that could offset the tax in the US. Since in Exxon's case the rate was 47% it helped the company offset the income tax in the US.


That evil Exxon!

 

[nick1985]

This thread should have been locked due to lack of comment from the OP but since it's still here I'll make the OP feel better with the following...

http://thinkprogress.org/2010/04/06/exxon-tax/

Two wrongs make a right. We can now lock up this thread.

 

[werepossum]

And I think that's wrong. I paid about $40k in taxes last year after it was all said and done. A huge chunk of that money went directly into the pockets of people who, like me, have access to infrastructure and protection of the law. The problem is that they are using all of these things and, not only not paying for them, but they are being paid for their troubles. That is the problem here. You want me to pay taxes for infrastructure? Fine and dandy. You want me to pay more than someone else because I make more money and, one could argue, utilize more of these commonly-available resources? I might be able to swallow that. You want me to pay a metric buttload while other people pay absolutely nothing, then turn over even more to subsidize their lack of contribution? Now we have a problem. You can argue that life isn't fair, but this is unjust, which is a lot worse. If I go to Vegas, I want the dice to be fair. If I go to pay my taxes, I want the laws to be just. Justice is never served by forcefully taking my money and handing it to someone else. I can do that of my own free will if I wish, but using the government as an agent to accomplish that is unequivocally unjust.

But the vast majority of taxes aren't paying for infrastructure improvements.

But the price isn't fixed. On a whim, my taxes can double or triple with no additional benefit. I'm hardly a policy expert, but thinking about this for 30 seconds leads me to at least two superior methods for collecting taxes to pay for infrastructure:
1. collect based on use (i.e. pay tolls for miles driven - easily done without tracking my every movement by simply collecting it with property tax every year based on the mileage on the car), or
2. collect an equal amount from everyone (based on the idea that everyone has equal access to infrastructure, which is likely untrue, making #1 the obviously superior alternative).

The problem is that there is no fair return on human investment. To think that you are due a return because I drove down your street on my way to class every day is slavery of the individual to society. When society imposes a burden of this type on certain individuals but not others, the system is unjust. Will you demand cash from non-taxpayers who want to drive down your street? If not, then your argument is nothing but an appeal to emotion: you simply feel sorry for one segment of society and use that as a weapon against the rest. My paying taxes is my stock in society, not the other way around. Those who have no stock in society keep receiving dividend checks from my checkbook. They are free to run society into the ground because its decreased value has no bearing on their bottom line.

I will try to get back to that thread. I have been traveling a ton and miss a few days here and there. If a thread has a hundred new posts since my last one, I usually give up and move on.

Totally agree. When Obama says he wants to "fundamentally transform" America, he's not aiming for greater freedom or prosperity. In his own words he wants to "spread the wealth around", separating work from reward (like any form of collectivism - from each according to his means, to each according to his needs.) Everyone knows when you penalize (e.g. tax) something you get less of it and when you reward (e.g. subsidize) something you get more of it. Spreading the wealth by taking the wealth generated by the productive and distributing it to the bone idle just results in more bone idle and a net decrease in society's wealth - which is of course not a problem to the elitists like the Messiah because they are more interested in pandering and punishing than in society's wealth, and controlling who gets what ensures that they will always get theirs off the top.

 

[Ldir]

Totally agree. When Obama says he wants to "fundamentally transform" America, he's not aiming for greater freedom or prosperity. In his own words he wants to "spread the wealth around", separating work from reward (like any form of collectivism - from each according to his means, to each according to his needs.) Everyone knows when you penalize (e.g. tax) something you get less of it and when you reward (e.g. subsidize) something you get more of it. Spreading the wealth by taking the wealth generated by the productive and distributing it to the bone idle just results in more bone idle and a net decrease in society's wealth - which is of course not a problem to the elitists like the Messiah because they are more interested in pandering and punishing than in society's wealth, and controlling who gets what ensures that they will always get theirs off the top.

This thread is getting interesting. Quit crapping in it with stupid teabaggery.

 

[WhipperSnapper]

Totally agree. When Obama says he wants to "fundamentally transform" America, he's not aiming for greater freedom or prosperity. In his own words he wants to "spread the wealth around", separating work from reward (like any form of collectivism - from each according to his means, to each according to his needs.)

I don't speak for Obama, but is it possible that some people who work are are not being rewarded properly--that some people aren't being compensated properly for the amount of wealth they produce, and that some people are being overcompensated? Is it thus possible that he wants to correct those imbalances so that people are compensated and rewarded properly for their work?

Spreading the wealth by taking the wealth generated by the productive and distributing it to the bone idle just results in more bone idle and a net decrease in society's wealth - which is of course not a problem to the elitists like the Messiah because they are more interested in pandering and punishing than in society's wealth, and controlling who gets what ensures that they will always get theirs off the top.

What if the truly productive people aren't receiving the pay they deserve and people who do little actual work are receiving huge amounts of compensation? Is it possible that our current system might be broken in some sort of a way? Do the Goldman Sachs and AIG people really deserve tens of millions of dollars a year?

 

[CycloWizard]

I don't speak for Obama, but is it possible that some people who work are are not being rewarded properly--that some people aren't being compensated properly for the amount of wealth they produce, and that some people are being overcompensated? Is it thus possible that he wants to correct those imbalances so that people are compensated and rewarded properly for their work?

What if the truly productive people aren't receiving the pay they deserve and people who do little actual work are receiving huge amounts of compensation? Is it possible that our current system might be broken in some sort of a way? Do the Goldman Sachs and AIG people really deserve tens of millions of dollars a year?

Hey, finally a reasonable argument in support of Obama's policies! And no, I'm not being sarcastic. Out of all the crap that gets posted here, I've never seen anyone take this angle, despite it being fairly obvious.

 

[Bowfinger]

I've addressed this more in the "Bad to be Rich" thread. Here are a few additional thoughts:

And I think that's wrong. I paid about $40k in taxes last year after it was all said and done. A huge chunk of that money went directly into the pockets of people who, like me, have access to infrastructure and protection of the law. The problem is that they are using all of these things and, not only not paying for them, but they are being paid for their troubles. That is the problem here. You want me to pay taxes for infrastructure? Fine and dandy. You want me to pay more than someone else because I make more money and, one could argue, utilize more of these commonly-available resources? I might be able to swallow that. You want me to pay a metric buttload while other people pay absolutely nothing, then turn over even more to subsidize their lack of contribution? Now we have a problem.

To set the record straight yet again, most of those people are also paying a buttload of taxes, especially in proportion to their actual disposable income. They simply aren't paying federal income taxes. It is a critical distinction that many seem to miss.

You can argue that life isn't fair, but this is unjust, which is a lot worse. If I go to Vegas, I want the dice to be fair. If I go to pay my taxes, I want the laws to be just. Justice is never served by forcefully taking my money and handing it to someone else. I can do that of my own free will if I wish, but using the government as an agent to accomplish that is unequivocally unjust.

That's a valid point, I agree. I can accept people having their federal withholding refunded in some circumstances. It's hard for me to justify giving some people more than they actually paid in. For whatever good intentions may be behind it, it's the wrong mechanism.

But the vast majority of taxes aren't paying for infrastructure improvements.

Agree somewhat. I think you're defining infrastructure much too narrowly. For example, I believe Defense is reasonably part of that "extraordinary physical, financial, and educational infrastructure" I often laud. I agree much tax money goes to other purposes, some serving society, some serving special interests, and some just poured down the drain.

But the price isn't fixed. On a whim, my taxes can double or triple with no additional benefit. I'm hardly a policy expert, but thinking about this for 30 seconds leads me to at least two superior methods for collecting taxes to pay for infrastructure:
1. collect based on use (i.e. pay tolls for miles driven - easily done without tracking my every movement by simply collecting it with property tax every year based on the mileage on the car), or
2. collect an equal amount from everyone (based on the idea that everyone has equal access to infrastructure, which is likely untrue, making #1 the obviously superior alternative).

I address this more in the other thread. I will point out that we already do #1 in some cases, including a toll for miles driven. It is collected indirectly, however, via the tax on gasoline. The advantage of this approach is that vehicle weight dramatically affects the wear and tear on roads. Heavier vehicles tend to consume more gasoline, making a gasoline tax a means of measuring both mileage and weight.

Unfortunately, this metered use approach would become overwhelmingly complicated if we tried to apply it to all government goods and services. It is far more practical to simply pool the cost over taxpayers in general, much like insurance pools risk. Otherwise, the IRS would need 300 million employees to precisely track all the goods and services used.

The problem is that there is no fair return on human investment. To think that you are due a return because I drove down your street on my way to class every day is slavery of the individual to society. When society imposes a burden of this type on certain individuals but not others, the system is unjust. Will you demand cash from non-taxpayers who want to drive down your street? If not, then your argument is nothing but an appeal to emotion: you simply feel sorry for one segment of society and use that as a weapon against the rest. My paying taxes is my stock in society, not the other way around. Those who have no stock in society keep receiving dividend checks from my checkbook. They are free to run society into the ground because its decreased value has no bearing on their bottom line.

I believe I've addressed this above and in the other thread. If you feel I've missed a key point (as opposed to just generally thinking I'm an idiot ;-). please call it out.

I will try to get back to that thread. I have been traveling a ton and miss a few days here and there. If a thread has a hundred new posts since my last one, I usually give up and move on.

I hear you. My own access is spotty. At the moment, I really need to get off my ass and head to the office. Otherwise I may become one of the subsidized instead of a subsidizer.

 

[CycloWizard]

I've addressed this more in the "Bad to be Rich" thread. Here are a few additional thoughts:

To set the record straight yet again, most of those people are also paying a buttload of taxes, especially in proportion to their actual disposable income. They simply aren't paying federal income taxes. It is a critical distinction that many seem to miss.

Agreed, but there is still no proportionality to access or use of resources in the current system. Basing the amount of property taxes someone pays on the assessed value of their home has nothing to do with the down-the-road benefits they might receive by their children attending a given school. Basing the tax which pays for city roads on income is equally flimsy. The system is broken and needs to be fixed, but that's another topic for another thread I suppose.

That's a valid point, I agree. I can accept people having their federal withholding refunded in some circumstances. It's hard for me to justify giving some people more than they actually paid in. For whatever good intentions may be behind it, it's the wrong mechanism.

Agreed.

Agree somewhat. I think you're defining infrastructure much too narrowly. For example, I believe Defense is reasonably part of that "extraordinary physical, financial, and educational infrastructure" I often laud. I agree much tax money goes to other purposes, some serving society, some serving special interests, and some just poured down the drain.

I would also put defense in that area, though in a much more limited role than it now fills (i.e. offense ).

I address this more in the other thread. I will point out that we already do #1 in some cases, including a toll for miles driven. It is collected indirectly, however, via the tax on gasoline. The advantage of this approach is that vehicle weight dramatically affects the wear and tear on roads. Heavier vehicles tend to consume more gasoline, making a gasoline tax a means of measuring both mileage and weight.

Agreed, but my Prius gets close to 50 mpg and weighs 2900 pounds, so I pay less than someone else who drives an Integra getting 30 mpg and weighing in at 2400 pounds (these are the two cars I've owned, which is why I know the random numbers and use them in the example ). The other problem is that I think most gasoline taxes are federal (at least here), whereas local income taxes are used to pay for local roads. Again, the system just isn't designed to assess actual use and is based on arbitrary BS, but is easily fixable with some common sense.

Unfortunately, this metered use approach would become overwhelmingly complicated if we tried to apply it to all government goods and services. It is far more practical to simply pool the cost over taxpayers in general, much like insurance pools risk. Otherwise, the IRS would need 300 million employees to precisely track all the goods and services used.

If it's too difficult to assess a fair usage "fee," as it were, then government is doing too much and can't enforce its own rules - which I think is the position we already find ourselves in. If a company is too large to properly charge its customers for services rendered, then the company will fail. The problem is that government is literally too big (or, at least, too ingrained in society) to fail. Most services can be quantified relatively easily - how many miles we drive, how much water/electricity we use, how much mail we send. Those that are not, such as defense, obviously need to be spread around and I would even support some degree of progressivity in how they are paid for. However, plenty of "services" which are now provided by the government likely should not be and I absolutely object to paying for them in any way, shape, or form as it is simply one party writing a check to the government, who then deposits it and writes the same check to another person who paid no taxes. This is completely bassackwards as it penalizes productivity and rewards others for being unproductive.

 

[Bowfinger]

Agreed, but there is still no proportionality to access or use of resources in the current system. Basing the amount of property taxes someone pays on the assessed value of their home has nothing to do with the down-the-road benefits they might receive by their children attending a given school. Basing the tax which pays for city roads on income is equally flimsy. The system is broken and needs to be fixed, but that's another topic for another thread I suppose.

I agree the current system has significant flaws. I do believe taxes are loosely correlated with the usage of and benefits obtained via tax-funded infrastructure and services, though this varies dramatically according to individual circumstances. I also believe it is generally the middle and upper middle class who get the least return per dollar of taxation.

Agreed.

I would also put defense in that area, though in a much more limited role than it now fills (i.e. offense ).

Agreed, but my Prius gets close to 50 mpg and weighs 2900 pounds, so I pay less than someone else who drives an Integra getting 30 mpg and weighing in at 2400 pounds (these are the two cars I've owned, which is why I know the random numbers and use them in the example ). The other problem is that I think most gasoline taxes are federal (at least here), whereas local income taxes are used to pay for local roads. Again, the system just isn't designed to assess actual use and is based on arbitrary BS, but is easily fixable with some common sense.

I know some states impose per-gallon gasoline taxes, and it's my impression that this is typical for most, if not all, states. In Iowa, this tax goes into a dedicated Road Use Fund that is legally restricted to paying for road-related expenses only (though this is somewhat broadly interpreted to include the State Patrol, for example). Gas tax money may not be used for General Fund expenses, at least in Iowa. YMMV.

If it's too difficult to assess a fair usage "fee," as it were, then government is doing too much and can't enforce its own rules - which I think is the position we already find ourselves in. If a company is too large to properly charge its customers for services rendered, then the company will fail. The problem is that government is literally too big (or, at least, too ingrained in society) to fail. Most services can be quantified relatively easily - how many miles we drive, how much water/electricity we use, how much mail we send. Those that are not, such as defense, obviously need to be spread around and I would even support some degree of progressivity in how they are paid for.

Agree, at least in concept. I'm sure I could find something to nitpick.

However, plenty of "services" which are now provided by the government likely should not be and I absolutely object to paying for them in any way, shape, or form as it is simply one party writing a check to the government, who then deposits it and writes the same check to another person who paid no taxes. This is completely bassackwards as it penalizes productivity and rewards others for being unproductive.

Two issues with this. First, you continue to dwell on those "who paid no taxes." Even assuming you're being imprecise and mean "no federal income taxes," I think the issue is overstated. Your incomes taxes are just as likely to go to subsidizing companies and other special interests as they are to welfare for the poor -- including retirees who paid plenty of federal incomes taxes all their lives. I absolutely agree government spends too much. I just recognize it's not as simplistic as is often portrayed by the anti-tax zealotry of the right.

Also, for better or worse, we have a nominal democracy. That means the government spends money based on the decisions of those we elect to represent us. This carries two key implications. One, majority rules so we all get to pay for things we don't personally agree with.

Two, in my view the real issue, the one thing Americans should all be focused on, is that our elected "representatives" don't really represent us. Thanks to the total perversion of our democracy by special interest money, our government pays little attention to the best interests of the public as a whole. Change this, kill the legal fictions that organizations have the same Constitutional rights as We, the People, and that money is protected speech, get the money out of Congress and only then will we start seeing a government that better represents our interests.

 

[werepossum]

I don't speak for Obama, but is it possible that some people who work are are not being rewarded properly--that some people aren't being compensated properly for the amount of wealth they produce, and that some people are being overcompensated? Is it thus possible that he wants to correct those imbalances so that people are compensated and rewarded properly for their work?



What if the truly productive people aren't receiving the pay they deserve and people who do little actual work are receiving huge amounts of compensation? Is it possible that our current system might be broken in some sort of a way? Do the Goldman Sachs and AIG people really deserve tens of millions of dollars a year?

I attempted to post a longer response Friday night but lost it when my Internet went out, but here goes: The free market is the most inherently fair judge of compensation because both parties are free to walk away if not satisfied. Where we agree to interfere with the free market and set wages, it is not because of fairness - we are by definition making the agreement less fair - but because we perceive a benefit to society that overrides the value of fairness. Substituting Obama's whim or reasoned judgment is always going to be worse than EVERYONE'S reasoned judgment; that's why the free market works so well to produce wealth. In any case, replacing market decisions with decisions by politicians will ALWAYS result in those decisions being made for political considerations rather than any perceived fairness. Non-political people by definition never rise to the top of political systems.

There are of course some situations where compensation is not "fair", one being where unions skew the power toward the employee. But except for government workers this tends to be self-limiting and self-correcting as union companies must still compete with non-union companies, and in any case the relative power balance swings widely anyway. In fourteenth century Europe the employee gained a great deal of power because the Black Death so reduced the available work force, whereas nineteenth century Europe saw a huge swing toward empowering the employer because industrialization reduced the demand for workers. The USA saw similar swings in the World War II boom and the Great Depression respectively, and smaller swings occur continuously. The other great biasing agent is of course government, as almost all monopolies come from government. (It's much easier to become more useful to government than it is to become overwhelmingly more powerful than all possible competitors.) We're seeing that today with our repeated bailouts. Goldman Sachs and AIG management control billions, so compensation is naturally going to be very high, just as a professional athlete or actor makes obscene amounts of money - because obtaining the very best management, or quarterback, or star has a much, much more significant impact on economic success than does the lower-paid positions. But our climate of bail-outs has admittedly short-circuited the natural market controls.

 

[HendrixFan]

Hey, finally a reasonable argument in support of Obama's policies! And no, I'm not being sarcastic. Out of all the crap that gets posted here, I've never seen anyone take this angle, despite it being fairly obvious.

I read something similar to that idea a while back.

Minimum wage has not gone up relative to inflation and cost of living over the past 30 to 40 years. It is now (and has been for a while) possible to work full time and still be deep into poverty. If minimum wage were to be locked in at or above the poverty line, there would be less need for handouts. It is discouraging to low income workers to know that no matter how hard they work, they are a long way away from getting to the poverty line, much less comfortably above it.

The EIC basically works to offset the loss society has when large portions of the population live in poverty. Of course, as has been discussed in this thread, EIC doesn't seem to be the correct answer. We pay taxes so that others can receive the EIC. Minimum wage stays low, so that we don't have to feel what would happen if businesses had to pay more for labor. Flip it around though, and it might make better sense to do it differently. Push the minimum wage up, we all feel it as the cost is pushed onto everyone. At the same time, since minimum wage would be at or above the poverty line, we can eliminate the EIC.

The thing is, we are paying for the low minimum wage in the form of the EIC. It seems like an overly bureaucratic way to see to it that the bottom rung of society has just enough to get by. It creates class warfare and causes all kinds of fussing about taxes, so I'm sure that is why politicians on both sides prefer it. Set the minimum wage in place at a reasonable level, and let the market do the rest.

 

[HendrixFan]

I attempted to post a longer response Friday night but lost it when my Internet went out, but here goes: The free market is the most inherently fair judge of compensation because both parties are free to walk away if not satisfied. Where we agree to interfere with the free market and set wages, it is not because of fairness - we are by definition making the agreement less fair - but because we perceive a benefit to society that overrides the value of fairness. Substituting Obama's whim or reasoned judgment is always going to be worse than EVERYONE'S reasoned judgment; that's why the free market works so well to produce wealth. In any case, replacing market decisions with decisions by politicians will ALWAYS result in those decisions being made for political considerations rather than any perceived fairness. Non-political people by definition never rise to the top of political systems.

I think you are speaking more philosophically or theoretically than making practical observations. You speak of the "free market" and put a blind trust in it. The GDP is $14 trillion and federal, state and local spending is $6.5 trillion. 45% of our economy flows through the government, which I'm sure you have to admit starts screwing with the free market. Who doesn't know someone who is a government employee? I know quite a few, and the norm is someone who is extremely lazy but well paid in a job that is almost impossible to get fired. How does that affect wages and productivity for the other 55% of the economy?

Going away from the size and scope of government spending and its impact on the "free market", there is another caveat I have with the notion of a "free market". Elegant ideas of market efficiencies and meeting points between producer and consumer get thumped when dealing with large corporations. Corporations may exist in some sort of a free market against each other, but when consumers are placed into the market they have little power. Corporate interests in the government work to take what little power individuals do have in the free market. Economic models are built off the idea that a push upward applies downward pressure elsewhere and vice versa. The two parties have to have equal strength for that to work, and an individual is in no way equal to a corporation.

The other great biasing agent is of course government, as almost all monopolies come from government. (It's much easier to become more useful to government than it is to become overwhelmingly more powerful than all possible competitors.) We're seeing that today with our repeated bailouts. Goldman Sachs and AIG management control billions, so compensation is naturally going to be very high, just as a professional athlete or actor makes obscene amounts of money - because obtaining the very best management, or quarterback, or star has a much, much more significant impact on economic success than does the lower-paid positions. But our climate of bail-outs has admittedly short-circuited the natural market controls.

The problem with your GS or AIG defense, or anyone else in a similar situation is twofold. First, a free market doesn't exist when a company has that much influence. Throwing aside any "free market" commentary I had above, if a single player has that much power in the market place you very clearly are not in a free market. How do you accurately price compensation for someone when there is no free market to make such valuations? Since when does someone with a strangehold on a market act in a fair manner?

Second, the athlete or actor comparison is simply not valid. When you go to see the Cavaliers play basketball, you are likely paying to see Lebron James play. He is the draw, he is the earning power for the team. The team does their part (stadium, marketing, jerseys, teammates, coaches, facilities, etc) but the real reason people plunk down money is to see Lebron play. Same with a "name" actor like Brad Pitt to can get $20 million or more for a movie. Those exceptional people provide a service, entertainment. People pay large sums of money for entertainment, so there is a wealth created by the athlete or actor. It is clear that someone like Lebron James provides value at the price he is paid. What wealth does GS create? At least in comparison to the obscene amount of money they make? "Products" like high frequency trading are just leeches that suck money out of the system while claiming they are helping efficiency in pricing. Leaning back on the first point, given their market size it is impossible to tell if anyone at GS provides the value at the price they are paid. It isn't just debatable, it is impossible.

 

[Nemesis 1]

Today its worse than ever. I recently built a new shop garage. When I had to hire professsionals it was easy getting cheap labor so long as it was all cash. Its never been easier as the government has lost the faith of the people it represents(RULES OVER).

Making money off the books has never been easier or more rewarding . I can hire whom ever I want to do small jobs . I don't care if its cash or check. I preferr cash . If these people don't report earnings its not my problem .

 

[WhipperSnapper]

The free market is the most inherently fair judge of compensation because both parties are free to walk away if not satisfied.

People are "de jure" free but not necessarily "de facto" free. If your only choice is to work for the two or three crappy employers in your town who will hire you at below-minimum wage or starve or go homeless then are you really "free"? I don't know what you mean by the word "fair", but I don't think "fairness" has much to do with compensation. Supply and demand is the driving force behind the price point. It has nothing to do with "fairness".

What if your nation's government destroyed the labor market and merged it with billions of impoverished people to drive down the price point so that the wealthy people who own the businesses could make larger profits from labor? That is to say, what if for those reasons the wealthy people can now pay people a fraction of the amount of compensation they would pay without those disastrous government policies, resulting in their keeping a larger amount of the value of an employee's contribution to the act of wealth production than they would have kept before?

Substituting Obama's whim or reasoned judgment is always going to be worse than EVERYONE'S reasoned judgment; that's why the free market works so well to produce wealth. In any case, replacing market decisions with decisions by politicians will ALWAYS result in those decisions being made for political considerations rather than any perceived fairness. Non-political people by definition never rise to the top of political systems.

It is now very very questionable whether or not having a truly free market is the best economic system. Real capitalism would be an economic and social disaster for most people. Under the free market unscrupulous parties can commit fraud and make it impossible for defrauded people to obtain just compensation (see the Housing bubble). Under the free market businesses can merge the nation's labor market with impoverished labor markets resulting in impoverishment domestically.

Now, I'm not an inherent opponent of having a free market, but I think substantial regulation is necessary, and I don't buy into the dogma that people get what they deserve and that "fairness" always or even often prevails.

There are of course some situations where compensation is not "fair", one being where unions skew the power toward the employee. But except for government workers this tends to be self-limiting and self-correcting as union companies must still compete with non-union companies, and in any case the relative power balance swings widely anyway.

Is it possible that the unions compensate for and act as a counterweight to ways that wealthy interests can "skew the power" in favor of businesses and employers?

The other great biasing agent is of course government, as almost all monopolies come from government. (It's much easier to become more useful to government than it is to become overwhelmingly more powerful than all possible competitors.)

Is it possible that some monopolies could also arise from intellectual property rights (see pharmaceuticals) or complete ownership of very limited natural resources? You could argue that having intellectual property rights is the same as being given a monopoly by the government, but I don't think that's what you meant that.

We're seeing that today with our repeated bailouts. Goldman Sachs and AIG management control billions, so compensation is naturally going to be very high, just as a professional athlete or actor makes obscene amounts of money - because obtaining the very best management, or quarterback, or star has a much, much more significant impact on economic success than does the lower-paid positions. But our climate of bail-outs has admittedly short-circuited the natural market controls.

The athletes at least don't manage the organizations they work for. In contrast, when you're talking about the CEOs, it's very questionable whether or not their excessive salaries are in the interests of their shareholders. Also, oftentimes these guys drive their companies into the ground. I don't buy the BS that the CEOs are as unique or as relatively talented as professional athletes and that they are all exceptional super-genius ubermen with IQs in excess of 160. Even Ayn Rand acknowledged that many CEOs and businessmen could be corrupt and without merit (see Orren Boyle in Atlas Shrugged).