5 ms·

Lower-class / Middle-class / Upper-class defined as brackets of income seems to be the wrong way to divide things. There is an ownership class that receives pr

by imgabe 7y ago

Lower-class / Middle-class / Upper-class defined as brackets of income seems to be the wrong way to divide things. There is an ownership class that receives preferential tax treatment and a labor class that doesn't. A small business owner might only net $80k/year, but their incentives in regards to policy are more aligned with a billionaire startup founder than with an $80k/year middle manager, because their income doesn't come in the form of a W-2 job. It doesn't really matter the amount of income you're getting, it matters a lot more in what form it comes. People who work for others and have a boss who determines their livelihood have more in common with each other regardless of how much they make than people who own businesses. Even movie stars have a union.

sandworm101 7y ago
>> Even movie stars have a union. There are limits. Most all celebs and sports stars are not really employees. They setup personal services companies that contract with the "boss" and then pay themselves a salary from the services company. Even thought they have a clear "job" and theoretically are paid a wage, such persons care more about taxation of dividends and the costs of offshoring money. If they choose to pay taxes, they determine for themselves where and when that money is paid. So while a working union actor may have much in common with the factory worker, the celebrity stars who earn millions do not. The breaking point between the two groups, imho, is the personal services contract. Those who work for the agreed standard or union wage are workers and arguably lower/middle class. Those who negotiate their own pay structures are not.
- imgabe 7y ago
  Fair enough I was being somewhat tongue-in-cheek. I think we are long past the days where actors would be under contract to only work with one studio.
shados 7y ago
I think there is one line that matters in term of income though, and it is the threshold of "I no longer worry about most things". On one side you have the folks where a bad health emergency, a boiler that breaks, a forgotten debt or an issue with their car could be the end of the world. Then there's people who are sitting on the couch, notice the floor is dusty, cringe and call their maid service to come back to clean the spot they missed. there's some overlap, but generally speaking the two groups see the world VERY differently. Your priorities change a lot when your day to day is about survival vs when it's about making sure you don't lose what you have.
- BrandoElFollito 7y ago
  True, but the nature of the emergency is also linked to the country. I am writing this from an ER room where they keep me a few hours to make sure everything is fine after a very minor electrical shock. This is in France and I will not see the bill (though this is a private hospital). If I lose my job I will have social security protection. The job is protected as well (no at-will here). Generally speaking the most important health and survival elements are covered by the state. The boiler, though...
rayiner 7y ago
That's a contrived late-20th century distinction meant to make high-income professionals feel better about themselves. Historically in the U.S., doctors, lawyers, bankers, etc., were considered part of the upper class. But they (even bankers) receive labor income, not capital income.
- imgabe 7y ago
  It depends, there are doctors and lawyers and bankers who run their own practice or firm and are business owners and there are ones who work for others. "Making partner" is basically moving from the labor class to the ownership class.
  - rayiner 7y ago
    There's a multiplier effect, but it's still all labor income (and taxed as such), not capital income. Approached from the other side--someone who cleans houses may hire some helpers (and get a share of the output of their labor). But few would consider an independent house cleaner to be upper class. The distinction, historically, was not about capital versus labor. It was about white collar work that allowed a lifestyle where you could have most ordinary things without worrying about money.
- jasode 7y ago
  >That's a contrived late-20th century distinction meant to make high-income professionals feel better about themselves. I understand your angle and I didn't downvote your other comment in this thread but your perspective emphasizes the math of income brackets and percentiles. However, people don't use that criteria when self-identifying their income class. A lot of white-collar professionals making $200k simple don't consider themselves "upper class". It's not a matter of denial. I would bet that if you surveyed software engineers earning $200k, most would not use the label "upper class" to describe themselves because to do so would be strangely pretentious. If a tiny 1000 sq ft Palo Alto house costs $1.5 million, a $200k salary does not feel "rich & wealthy". Therefore, reminding them they are in the top 5% of the income percentile doesn't change the self-identification of "middle class". From their perspective, it feels like middle class.
rayiner 7y ago
Capital gains accruing to people who live primarily off capital gains accounts for too little of total income to be a sensible dividing line. Total realized capital gains in 2017 was about $650 billion, about 30% of which accrued to people who realized an average of less than $50,000 in capital gains per year: https://www.taxpolicycenter.org/model-estimates/distribution-individual-income-tax-long-term-capital-gains-and-qualified-18 https://www.taxpolicycenter.org/model-estimates/distribution.... So you're talking about $460 billion in "ownership class" income annually, or 3.5% of all U.S. income. That's actually a very high estimate--because even within the top 1%, realized capital gains doesn't account for even half of total income. So under your theory, 96.5% of all personal income in the U.S. is earned by the "lower class" or "middle class." It's a very weird definition.
- imgabe 7y ago
  I think that makes sense since most wealth is increasingly concentrated among a smaller and smaller proportion of people. Yes, if you only look at realized capital gains it is a small percentage. Because even if you have $50 billion in stock, you really don't need to be spending $1 billion / year or anything ludicrous. There is a limit to what one person or one family can consume, and the levels of wealth people can achieve are so incredibly far beyond that, that of course they don't need to realize a lot of gains to get the lifestyle they want. Several years ago my job took me to do some work at the home of someone in the top 10 of the Forbes 400. I was chatting with one of his staff and this person had homes all over the world, one of the largest yachts ever made, private plane, etc. The annual cost for running everything was on the order of $50 million / year. Astronomical, yes, but as a percentage of their net worth practically nothing.
  - rayiner 7y ago
    Paper net worth that isn't spent is fairly meaningless, though. We care about defining upper class versus lower class because money dictates access to scarce resources. For the most part, you can't buy access to scarce resources (in your example, labor, yachts, private planes), without realizing capital gains.
hellisothers 7y ago
“Class” by Paul Fussell, is a good (if arch) read on this angle.

by imgabe 7y ago

sandworm101 7y ago

>> Even movie stars have a union. There are limits. Most all celebs and sports stars are not really employees. They setup personal services companies that contract with the "boss" and then pay themselves a salary from the services company. Even thought they have a clear "job" and theoretically are paid a wage, such persons care more about taxation of dividends and the costs of offshoring money. If they choose to pay taxes, they determine for themselves where and when that money is paid. So while a working union actor may have much in common with the factory worker, the celebrity stars who earn millions do not. The breaking point between the two groups, imho, is the personal services contract. Those who work for the agreed standard or union wage are workers and arguably lower/middle class. Those who negotiate their own pay structures are not.

imgabe 7y ago
Fair enough I was being somewhat tongue-in-cheek. I think we are long past the days where actors would be under contract to only work with one studio.

shados 7y ago

I think there is one line that matters in term of income though, and it is the threshold of "I no longer worry about most things". On one side you have the folks where a bad health emergency, a boiler that breaks, a forgotten debt or an issue with their car could be the end of the world. Then there's people who are sitting on the couch, notice the floor is dusty, cringe and call their maid service to come back to clean the spot they missed. there's some overlap, but generally speaking the two groups see the world VERY differently. Your priorities change a lot when your day to day is about survival vs when it's about making sure you don't lose what you have.

BrandoElFollito 7y ago
True, but the nature of the emergency is also linked to the country. I am writing this from an ER room where they keep me a few hours to make sure everything is fine after a very minor electrical shock. This is in France and I will not see the bill (though this is a private hospital). If I lose my job I will have social security protection. The job is protected as well (no at-will here). Generally speaking the most important health and survival elements are covered by the state. The boiler, though...

rayiner 7y ago

That's a contrived late-20th century distinction meant to make high-income professionals feel better about themselves. Historically in the U.S., doctors, lawyers, bankers, etc., were considered part of the upper class. But they (even bankers) receive labor income, not capital income.

imgabe 7y ago
It depends, there are doctors and lawyers and bankers who run their own practice or firm and are business owners and there are ones who work for others. "Making partner" is basically moving from the labor class to the ownership class.
- rayiner 7y ago
  There's a multiplier effect, but it's still all labor income (and taxed as such), not capital income. Approached from the other side--someone who cleans houses may hire some helpers (and get a share of the output of their labor). But few would consider an independent house cleaner to be upper class. The distinction, historically, was not about capital versus labor. It was about white collar work that allowed a lifestyle where you could have most ordinary things without worrying about money.
jasode 7y ago
>That's a contrived late-20th century distinction meant to make high-income professionals feel better about themselves. I understand your angle and I didn't downvote your other comment in this thread but your perspective emphasizes the math of income brackets and percentiles. However, people don't use that criteria when self-identifying their income class. A lot of white-collar professionals making $200k simple don't consider themselves "upper class". It's not a matter of denial. I would bet that if you surveyed software engineers earning $200k, most would not use the label "upper class" to describe themselves because to do so would be strangely pretentious. If a tiny 1000 sq ft Palo Alto house costs $1.5 million, a $200k salary does not feel "rich & wealthy". Therefore, reminding them they are in the top 5% of the income percentile doesn't change the self-identification of "middle class". From their perspective, it feels like middle class.

rayiner 7y ago

Capital gains accruing to people who live primarily off capital gains accounts for too little of total income to be a sensible dividing line. Total realized capital gains in 2017 was about $650 billion, about 30% of which accrued to people who realized an average of less than $50,000 in capital gains per year: https://www.taxpolicycenter.org/model-estimates/distribution-individual-income-tax-long-term-capital-gains-and-qualified-18 https://www.taxpolicycenter.org/model-estimates/distribution.... So you're talking about $460 billion in "ownership class" income annually, or 3.5% of all U.S. income. That's actually a very high estimate--because even within the top 1%, realized capital gains doesn't account for even half of total income. So under your theory, 96.5% of all personal income in the U.S. is earned by the "lower class" or "middle class." It's a very weird definition.

imgabe 7y ago
I think that makes sense since most wealth is increasingly concentrated among a smaller and smaller proportion of people. Yes, if you only look at realized capital gains it is a small percentage. Because even if you have $50 billion in stock, you really don't need to be spending $1 billion / year or anything ludicrous. There is a limit to what one person or one family can consume, and the levels of wealth people can achieve are so incredibly far beyond that, that of course they don't need to realize a lot of gains to get the lifestyle they want. Several years ago my job took me to do some work at the home of someone in the top 10 of the Forbes 400. I was chatting with one of his staff and this person had homes all over the world, one of the largest yachts ever made, private plane, etc. The annual cost for running everything was on the order of $50 million / year. Astronomical, yes, but as a percentage of their net worth practically nothing.
- rayiner 7y ago
  Paper net worth that isn't spent is fairly meaningless, though. We care about defining upper class versus lower class because money dictates access to scarce resources. For the most part, you can't buy access to scarce resources (in your example, labor, yachts, private planes), without realizing capital gains.

hellisothers 7y ago

“Class” by Paul Fussell, is a good (if arch) read on this angle.