Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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