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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 cap

by 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.
- imgabe 7y ago
  The point is that wealth is distributed along a power law and people making $200k/year from a W-2 job are not in the meaty part of the curve. You seem really invested in shaming them and demanding they pay more in taxes when if you're making that as a wage you're probably already paying close to 50% of your income in Federal and State taxes. At the same time they don't qualify for many of the deductions and subsidies that lower income people would so they're already paying more for the same things. How much more do we need to take from them? Yes, if they are in any way reasonably responsible they can live comfortably and have all their needs met. That's great. We should work on extending that possibility to more people instead of taking it away from one group of wage slaves and handing it to another. Meanwhile people making orders of magnitude more money are paying 15%, 10% or 0% in taxes. That's the "upper class" for all practical purposes.
  - rayiner 7y ago
    First, your premise is false: https://en.wikipedia.org/wiki/Distribution_of_wealth#In_the_United_States https://en.wikipedia.org/wiki/Distribution_of_wealth#In_the_.... As of 2007, the top 1% owned 35% of wealth, while the next 19% owned 50%. The top 20% is a net worth of about $500,000 including home equity, which pretty much any household making $200,000 will as they get older. Moreover, the wealth of the top 20% is going to comprise to a much greater extent ownership of scarce resources (housing in desirable areas, etc.) than the paper wealth of the top 1%. Second, what we care about at the end of the day is the distribution of access to consumption. Income models that better than wealth. Mark Zuckerberg might have an unrealized gain of $1 billion, but he can't out-compete someone else for access to scarce resources unless he realizes that gain. Indeed, Zuckerberg's wealth in particular is just a proxy for the right to receive a portion of Facebook's profits in the future based on the future labor of Facebook's employees. It doesn't represent anything tangible that exists right now. It's realized capital gains, not unrealized paper wealth, that is the proxy for goods and services that could be used to meet peoples' needs in the present. Third, the folks paying "15%, 10%, or 0% in taxes" represent an extremely small portion of total income. Eliminating the preference for capital gains, for example, would raise just a couple of hundred billion more in taxes (compared to the almost $7 trillion we already raise). It's something that makes a few people very rich, but they don't account for a very large portion of overall income. Fourth, and finally, someone making $200k/year isn't paying "close to 50%" of income in taxes. In Maryland, it's just over 30%. We're one of the few developed countries that taxes the top 5% so little.
    - imgabe 7y ago
      > Mark Zuckerberg might have an unrealized gain of $1 billion, but he can't out-compete someone else for access to scarce resources unless he realizes that gain. When 99.99% of people don't even have 0.1% of Zuck's net worth he doesn't need to realize anywhere close to $1 billion of gain to out-compete them. The distribution is so lopsided that he could realize gains encompassing most other people's entire net worth and it would be a rounding error in his accounting. That's without even getting in to the fact that at that level your brokerage will happily give you a low-interest loan to do things like buy a house or whatever you want so realizing gains is not at all necessary to have access to funds for consumption. "Realized capital gains" does not even begin to tell the story of the disparity in access to consumption.
harryh 7y ago
I know you probably picked "$50 billion in stock" at random, but for the record there are only ~10 people in the US with that kind of money. If they're the only people you are counting as "rich" you have defined the term very very narrowly.

by imgabe 7y ago

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.

imgabe 7y ago
The point is that wealth is distributed along a power law and people making $200k/year from a W-2 job are not in the meaty part of the curve. You seem really invested in shaming them and demanding they pay more in taxes when if you're making that as a wage you're probably already paying close to 50% of your income in Federal and State taxes. At the same time they don't qualify for many of the deductions and subsidies that lower income people would so they're already paying more for the same things. How much more do we need to take from them? Yes, if they are in any way reasonably responsible they can live comfortably and have all their needs met. That's great. We should work on extending that possibility to more people instead of taking it away from one group of wage slaves and handing it to another. Meanwhile people making orders of magnitude more money are paying 15%, 10% or 0% in taxes. That's the "upper class" for all practical purposes.
- rayiner 7y ago
  First, your premise is false: https://en.wikipedia.org/wiki/Distribution_of_wealth#In_the_United_States https://en.wikipedia.org/wiki/Distribution_of_wealth#In_the_.... As of 2007, the top 1% owned 35% of wealth, while the next 19% owned 50%. The top 20% is a net worth of about $500,000 including home equity, which pretty much any household making $200,000 will as they get older. Moreover, the wealth of the top 20% is going to comprise to a much greater extent ownership of scarce resources (housing in desirable areas, etc.) than the paper wealth of the top 1%. Second, what we care about at the end of the day is the distribution of access to consumption. Income models that better than wealth. Mark Zuckerberg might have an unrealized gain of $1 billion, but he can't out-compete someone else for access to scarce resources unless he realizes that gain. Indeed, Zuckerberg's wealth in particular is just a proxy for the right to receive a portion of Facebook's profits in the future based on the future labor of Facebook's employees. It doesn't represent anything tangible that exists right now. It's realized capital gains, not unrealized paper wealth, that is the proxy for goods and services that could be used to meet peoples' needs in the present. Third, the folks paying "15%, 10%, or 0% in taxes" represent an extremely small portion of total income. Eliminating the preference for capital gains, for example, would raise just a couple of hundred billion more in taxes (compared to the almost $7 trillion we already raise). It's something that makes a few people very rich, but they don't account for a very large portion of overall income. Fourth, and finally, someone making $200k/year isn't paying "close to 50%" of income in taxes. In Maryland, it's just over 30%. We're one of the few developed countries that taxes the top 5% so little.
  - imgabe 7y ago
    > Mark Zuckerberg might have an unrealized gain of $1 billion, but he can't out-compete someone else for access to scarce resources unless he realizes that gain. When 99.99% of people don't even have 0.1% of Zuck's net worth he doesn't need to realize anywhere close to $1 billion of gain to out-compete them. The distribution is so lopsided that he could realize gains encompassing most other people's entire net worth and it would be a rounding error in his accounting. That's without even getting in to the fact that at that level your brokerage will happily give you a low-interest loan to do things like buy a house or whatever you want so realizing gains is not at all necessary to have access to funds for consumption. "Realized capital gains" does not even begin to tell the story of the disparity in access to consumption.

harryh 7y ago

I know you probably picked "$50 billion in stock" at random, but for the record there are only ~10 people in the US with that kind of money. If they're the only people you are counting as "rich" you have defined the term very very narrowly.