Sunday, April 10, 2011
New York the New Namibia Redux? & What's the good of rich people if you can't tax them?
It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran.
WHEN I MOVED BACK TO NEW YORK after graduate school, the city was poor, about 3 years away from almost declaring bankruptcy (only prevented by the Federal government bailing the city out). One weekend I went to see the only Louis Sullivan building in New York, at the head of Crosby Street on Bleecker. At the time, there were no occupied storefronts until you got over to Broadway, where the stores were all low rent, selling cheap junk. Going the other direction on Bleecker was downright dangerous.
Today, all the storefronts are full. You can buy $12 Mast Bros. chocolate bars and new $200,000 tables - and in the current environment, $200,000 tables sell more quickly than the $1,000 tables.
That's because in recent years there have been more riches and rich people in the city than at any other time in its history. And yet at the same time we act like a poor city, cutting subway services and slashing the city budget.
When I moved back, many of the middle class were getting on the highways Robert Moses was building and moving out to the suburbs, and the city ranked 17th among the nation's counties in what the Brookings Institution calls "income inequality" - the spread between the richest and the poorest. Many neighborhoods were taken over by the poor, but today the super rich live in many of those same neighborhoods, and we are number one in income equality. The 20% at the top of New York City's money tree make 52 times what those in the bottom 20% make, a disparity roughly equivalent to the current situation in Namibia, which until 1990 was part of South Africa.
The top 1% in the United States now control 24% 40% of the income wealth in America, and of course many of those live in New York - and are behind the lobbying to lower their tax rates.
What good are the rich if you can't tax them?
PS: Fran Lebowitz says the rich are making New York City boring.
PPS: Warren Buffett says he and his rich friends should pay more taxes.
PPPS: The New York Times says corporate profits have never been higher - but that the companies are not creating jobs.
PPPPS: The New Yorker says Wall Street has no social value.
PPPPPS: JPMorgan CEO Says Rich Should Pay 'Lion's Share' Of Taxes
Please note, unlike New Urbanists, Warren Buffett and the New Yorker have never been known for their Marxist philosophy.
shooting in the dark here...uhhh...providing jobs for people?
Posted by: Erik at Nov 24, 2010 1:04:49 PM
"What good are the rich if you can't tax them?"
I absolutely agree, which is why the top 1% of wage earners, who control 20% of the adjusted gross income, already pay 38% of all income tax (in year 2008).
Posted by: Steve at Nov 24, 2010 7:33:55 PM
US corporations just had their best quarter ever - but the unemployment rate has not gone down. And even on Wall Street, profits are high partly because they laid people off (and also, of course, because they were bailed out by taxpayers).
We can now go back a few decades and look at the history of tax cuts and see that the result is not what supply siders say it is: middle-class incomes go down while the rich get a bigger and bigger share of income and assets.
And my main point is the same one that I've made before, and that Fran Lebowitz made a few nights ago on HBO: a New York City increasingly dominated by rich people is a city that gets less and less interesting at the same time that it gets less and less affordable for anyone but the rich.
The history of New York is that it has provided a home for bohemians who have been a crucial part of the city's culture.
Posted by: John Massengale at Nov 26, 2010 10:19:03 AM
Let the rich subsidize the bohemians that make the metropolis interesting...
hey, wasn't that the plot of Baz Luhrmann's "Moulin Rouge"?
Seriously though, out in the Silicon Valley we had this problem since at least the early 90s... the communities are not affordable for the working class that bags the groceries of the wealthy, so they commute miles from home, degrading the quality of life for everyone.
However, income redistribution via taxation only goes so far, then the Bay Area billionaires head up on the weekend to the Nevada shore of Lake Tahoe to establish their low-tax residency. W Magazine once said Incline Village, NV became the wealthiest zip code in America, when California discovered the peak of our state's Laffer curve.
What good are the rich if you can't tax 'em (because they moved away)?
Posted by: Steve at Nov 30, 2010 8:03:10 PM
First, you're watching too much HBO.
Second, I don't know how old you are, but when I was a kid, the Federal income tax rate over $200,000 was 90% AND New Yorkers (both residents and commuters) paid New York City taxes.
And yes, you're right, some of them moved away. But in many ways New York was a better place.
There's rarely a perfect solution and New York is in some ways a better place today. (And before you talk about New York City going bankrupt, that was when Ed Logue defaulted on Big Mac bonds.)
What we want is a balance. New York has never been richer than it is today, and it has tilted too far towards the super rich. We want more cultural richness and a livelier city, and for that it would actually be beneficial if some of the rich would move and stop propping up ridiculous real estate prices.
There have been several relevant articles in the New York Times during the past week, and I'll try to post some of them. The articles underline that the trickle down theory and the Laffer curve have not stood the test of time, and that great prosperity in American business is not creating jobs.
The good news may be that the recent boom has refurbished the city's housing stock and that now prices will become more affordable as some of the rich decide to go elsewhere. That has happened before.
Posted by: john at Nov 30, 2010 8:32:24 PM
“Laffer Curve have not stood the test of time.”
Of course it has, it is self-evident:
* If the government taxes you 100%, you have no incentive to work, so you won’t go to work, so there will be nothing to tax, and there is no government funding.
* If the government taxes you 0%, there is no government funding… and anarchy would ensue, making anythin but a barter economy impossible.
* Somewhere in between those extremes is a ideal taxation scheme that maximizes government revenue That is the peak of the Laffer Curve (no one believes its shape is a true curve).
So obviously the principle is valid. The important questions are:
• What is the right tax policy to maximize revenue for the government?
• What are societal benefits does taxation provide to all of us to make it worthwhile for me to put up with the government taking as much as I can possibly stand (the peak of the “curve” for me)?
• Do I see those societal benefits of equal or greater value having been provided by government, or could I have found another more robust method of providing those benefits (philanthropy, etc.)?
You pulled out a number of 90% at the top bracket; maybe that was just past the peak of a Laffer curve in New York - - power to you.
All I can tell you is that out here in California, businesses are moving away in droves, with none coming into the state. Even the Auto Club of CALIFORNIA moved 1100 jobs to Texas in October.
Our revenue is already projected $6 billion lower that was approved in the state’s budget just one week before.
Posted by: Steve at Dec 7, 2010 8:13:03 PM