Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20
Global "Debt Mountain": Beware of This "New Peak" - 13th Nov 20
Overclocking Zen 3 Ryzen 5600x, 5800x, 5900x and 5950x to 4.7ghz All Cores Cinebench R20 Scores - 13th Nov 20
Is Silver Leading Bitcoin or is Bitcoin Leading Silver? - 13th Nov 20
How Elliott Waves Simplify Your Technical Analysis - 13th Nov 20
How to buy Bitcoins using debit/credit card? - 13th Nov 20
Will COVID Vaccine Kill Gold and Silver? - 12th Nov 20
Access to Critical Market Reports - 12th Nov 20
Stock Market Dow Futures Reach 30,000 on News of COVID-19 Vaccine Trials Success - 12th Nov 20
8 Terms & Conditions You Must Know Before Asking For Life Insurance Policy Quotes - 12th Nov 20
Gold Stocks Post 2020 US Election Outlook - 11th Nov 20
Champions’ League Group Stage Draw: All You Need To Know - 11th Nov 20
Stock Market Secular Trend - 11th Nov 20
Stock Market Correction Curtailed by US Election - 11th Nov 20
What Causes a Financial Bubble? - 11th Nov 20
Ryzen 9 5900X RTX 3080 - Scan.co.uk vs Overclockers.co.uk UK Custom PC System Builder Review - 10th Nov 20
Killing Driveway Weeds FAST with a Pressure Washer - Saving Block Paving from LOTS of WEEDs - 10th Nov 20
Trump Fired, Biden Hired, What Next?  - 10th Nov 20
Looking for a Personal Loan? Here Is What You Have To Know  - 10th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Fake Numbers Fueling the Wage War on Wealth

Politics / Economic Statistics Oct 22, 2019 - 01:38 PM GMT

By: Rodney_Johnson

Politics I’m stupid about the cost of a lot of things. I don’t mean uneducated, or lacking knowledge. I’m talking about downright dumb as a stump. Thank goodness the Bureau of Labor Statistics (BLS) is around to set me straight.

Take my television, for instance.



Thank Goodness for BLS

I have a 46” flat screen TV, connected to cable. It cost me around $700 several years ago. I use it to watch a few shows and maybe a game or two. I think televisions cost more than they used to. But the BLS tells me that I actually got a price break, not because I spent less at the register, but because the new unit has better features than the old one.

Using this method of hedonic adjustment, the BLS estimates that thousands of products cost less even as we shell out more real-world bucks to buy them. This is one way that we get inflation on paper that doesn’t match what we experience in our checkbooks .

Now authors Emmanuel Saez and Gabriel Zucman of the University of California, Berkeley, are using some of the same techniques to explain how we make a lot more than we think we do. And how we pay a lot less in taxes than we see on our tax returns.

You might not know this financial dynamic duo, but their work is the basis of tax-the-rich proposals championed by Democratic presidential hopeful Elizabeth Warren and others. So, it’s worth understanding how they arrived at the numbers that will be used to beat you into submission to giving the government more of what you have.

About Their New Book…

The book is titled “The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay.” In it, they twist income and tax payments at both ends of the income scale to show that the poor pay a lot more and the rich pay a lot less. Both claims are dubious.

For everyone, Saez and Zucman include federal, state, and local income taxes, and then add sales tax as well as payroll taxes. Income taxes at all levels make sense. But sales taxes are questionable because they involve voluntary purchases. And payroll taxes technically give you a claim on benefits later in life.

When it comes to Social Security taxes, lower-income workers are paid a higher replacement rate when they start collecting benefits than those at the top of the scale. I didn’t see where Saez and Zucman included that adjustment.

Funny Figures

For taxes paid, the pair ignored the Earned Income Tax Credit, which sends money back to low-income workers. I’d think this tax rebate would count as lowering your tax payment, but not in their view. And it doesn’t count as income either. The tax credits are part of an entirely separate program of government transfers. Even though these are real dollars that flow into bank accounts and can be used to buy stuff.

At the other end of the scale, the adjustments get really questionable.

Saez and Zucman argue that all earnings and taxes eventually flow to people. So, corporate retained earnings and corporate taxes should be assigned to their eventual owners, shareholders. Because high income families overwhelmingly hold the most financial assets, the authors assign them their “share” of retained earnings and corporate tax payments.

The 2017 Tax Reform Act dramatically lowered the corporate tax rate, which conversely pushed up corporate profits. Including these figures, Saez and Zucman found that the richest 400 households “suddenly” pay less tax on their income than the poorest Americans.

Hmm.

I can’t touch or spend the retained earnings held by companies in which I own shares, and their tax payments didn’t come out of my bank account, yet these two figures are assigned to me when figuring out who pays what.

There’s a word for that… fantasy.

Companies often squander retained earnings on stupid stuff, never returning the cash to shareholders, so claiming that I somehow “earned” that money makes no sense. The same goes for their taxes. I didn’t pay.

Go with the Truth

Saez and Zucman use their made-up world to justify the ends, which is a much higher tax rate on high earners and those who hold wealth.

But the exercise isn’t necessary – and worse, it’s unwanted and harmful.

Instead of spending hundreds of pages torturing statistics and then helping political candidates do the same, they could simply go with the truth. Our economic system has helped raise billions of people around the world out of poverty and make the U.S. an economic superpower. It also allows for unequal outcomes, which can become extreme. Twisting the data allows opponents to poke holes in the logic even when the overriding issue of inequality remains. It’s a distraction.

Through electing political leaders and voting on state and local programs, voters decide how much of the inequality should be addressed through income redistribution. As the 2020 election gets closer, we get to decide for ourselves which approaches make sense. It would be easier to figure out if we were given clear numbers without a lot of obfuscation meant to lead us one direction or the other, but that’s probably too much to ask.

Rodney Johnson

Follow me on Twitter ;@RJHSDent

By Rodney Johnson, Senior Editor of Economy & Markets

http://economyandmarkets.com

Copyright © 2019 Rodney Johnson - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Rodney Johnson Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules