excerpts.

The other day, on the Democratic debates, again I heard Obama and Clinton railing against the "top 1%" with regards to tax cuts.  I've heard this before and pretty much just ignored it, on the assumption that, being an information worker, I may not be the "top 1%" but I sure do like them, and it can't be that bad that they're getting tax cuts or even benefiting from them.

So who are these "top 1%" people?  Looking around the web, I came across Berkeley economics professor Emmanuel Saez's article "Income Inequality in the United States, 1913-1998" (updated to 2003).  Here are some numbers (from 2005):

Full Population of people 145 million, average income $46,820
Bottom 90% 131 million, average income $28,947

We see them all the time - car cealers, the nightly news anchor in a decent sized metro (Denver, for example), your doctor.  We all probably know someone that's in the top 1%, if it's not our parents, then it's our friends parents.  Some of us even have college roommates who're now doctors or lawyers.

Piketty and Saez propose that progressive taxation, after the Great Depression and the two World Wars, kept the rebound of the top shares of income and wealth low to the point of not recovering to their pre WWI levels.  Even though recent technology (the computer revolution) has been more favorable to the gains of the upper income shares than in other periods through their study (1913 - 2003), the effects of progressive taxation has managed to keep that low.  They even mention that "any positive capital income tax rate above a given high threshold of wealth will eventually eliminate all large wealth holdings without affecting, however, the total capital stock in the economy" - in other words, if I'm reading this right, you can tax the very rich out of existance.  One might say, looking at their charts, that we already have a massive discrepancy in wealth.  They go on to say "[o]ur results suggest that the decline in income tax progressivity since the 1980s, the reduction in the tax rate for dividend income in 2003, and the projected repeal of the estate tax by 2011 might produce again in a few decates levels of wealth concentration similar to those of the beginning of the twentieth century."

Some factors that retarded the rebounding of wealth after WW1 and Great Depression

• Corporate Taxation pre WW2
• Increased enforcement of anti-trust law after 1930
• WW2

The question for me is not "what causes income disparity?" or "what caused the income disparity?" but "how the heck do I get up that ladder?"

Implications regarding the Iraq/Afghanistan war, or any other "war rumblings" (Iran, etc.)

• War hurts the economy and the wealthy in ways that are long term and disrupt predictive analysis

Implications regarding the upcoming election

•  Democrats, who look to eliminate the repeal of the estate tax and increase taxes, will enivitably hurt the wealthy and possibly the viability of this country

Implications regarding moving up the ladder

• Have capital income - buy and hold stocks, and set a profit target to sell - even though wars and progressive taxation slow the potential
• Have dividend income - buy and hold stocks that pay a dividend - even though wars and progressive taxation slow the potential
• Keep working - modern times requires that even the wealthy keep working.  For me, a corollary appeared: Since I don't like what I do, this is saying that there's no reality to my "escape dream" (I'll eventually have enough compounded interest or dividend income to just "stop working") and that aphorisms like "love your job" and "find a job you love to do" take on a bitter edge.  Note to self: Change careers (after making a bunch of money).
• Don't just be a worker - own your own business

Reading on the Kindle

• Reading on the Kindle's a joy and easy - I read more with a techno treat.
• Mobipocket PDF conversion messed up the paragraph and section spacing, running all the text together.  Further, it placed the footnotes in-line with other text and breaks up the flow of the article.  The net effect was annoying, but it kept me engaged, otherwise I'd have gotten bogged down in the econotechnical details and fallen asleep. (Ok, I did actually fall asleep once.)
• I was able to look up words I was unfamiliar with using the Kindle's internal dictionary which was helpful.  I'd already gone to my computer and Google by the time I remembered the feature, though.  Next time.

References

• http://elsa.berkeley.edu/~saez/
• http://www.cato.org/pub_display.php?pub_id=6880