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The Wild Ride Of The Top 1%

19 points by jkuria 15y ago

wanorris 15y ago
The simplest explanation for the volatility is that brutal tax rates prior to the Reagan tax cuts led the wealthy to keep their money safe and to try not to realize too much income in any given year -- and if possible, hide their income entirely so that they didn't have to pay taxes. Slashing the tax rates made it more practical to just go ahead and realize any income you can get. Since earning an anomalously high income is -- obviously -- itself anomalous, it stands to reason that a high percentage of the highest incomes were due to one-shot gains, whether from cashing in on options in a company after an IPO or a vesting, making a huge trade in the market that pans out impossibly well, or simply making the deal of a lifetime in a business arrangement. Any disagreements? Other possible explanations? This is pretty interesting macroeconomic data, so I'd love to hear more thoughts.
- patio11 15y ago
  A major portion was an IRS rule change which made it less tax efficient to do conspicuous consumption on the company dime. Japan has a treatment closer to the old way, and Japanese CEOs have wages which are not too dissimilar to American engineers but lifestyles which are similar to American CEOs. (e.g. Want a private flight to a vacation in Europe? That can be arranged, sir.)
lbarrow 15y ago
This sort of article is why serious people tend to roll their eyes when the Wall Street Journal comes up. Their agenda -- to humanize and sympathize with the 1% -- could not be more obvious. Why should I feel bad for someone who describes losing their $100m house as heartbreaking?
- jimbokun 15y ago
  You must have read a different article. The article I read went to great pains to point out the staggering extravagance of many wealthy people in the U.S. EDIT: I mean "Versailles"? Seriously? Like just building the largest residence in the U.S. wasn't ostentatious enough by itself?
  - lbarrow 15y ago
    I suppose it's dependent on how you read the article. I assumed that we were supposed to be sympathizing with these people -- although we both realized how ridiculous that would be.
    - wanorris 15y ago
      I started off sick at my stomach at the same thing you were complaining about -- the sad story of this unfortunate woman losing her 90,000 square foot house. But it became pretty clear that while they weren't mocking her to her face (which would be mean no matter who she was), they definitely weren't expecting everyone to sympathize with the plight of the extremely wealthy. They make this point most clearly here: > Of course, the trauma of giving up a Gulfstream or a yacht can't compare with the millions of Americans who have lost their only job or home. The Siegels will make do in their current 26,000-square-foot mansion.
- seagreen 15y ago
  I don't see anything wrong with humanizing the 1% given that they are, in fact, human.
vinhboy 15y ago
Which do you think happened first? Firing half of his work force, or deciding to finally put his house on the market. That's a pretty important distinction. In time of stress, who gets sacrificed first? Your employees or your luxuries? Also --- "from the Occupy Wall Street protesters in New York to the tax battles in Washington, portrayals of millionaires and billionaires are being shaped more by partisan ideologies than economic realities" --- really? Thousands of people in LA lining up to receive free health care because they are insured is "partisan ideologies"? What is "economic realities" then? The price of a Gulfstream?
joshmlewis 15y ago
I was browsing through real estate in SF the other day and saw a few mansions. I like clicking through the pictures and seeing what that kind of lifestyle would look like. At a price tag at 20mil and amazing views you'd think you'd be happy there but then I looked up the monthly payments for a 30 year loan and they would be 80,000 month. I was shocked and baffled at how someone could be ok spending that much money a month on a house. Who can afford this? You think of the common stereotypes but really who could do this. Someone list some names and what they did beside the mainstream people.

19 points by jkuria 15y ago

The simplest explanation for the volatility is that brutal tax rates prior to the Reagan tax cuts led the wealthy to keep their money safe and to try not to realize too much income in any given year -- and if possible, hide their income entirely so that they didn't have to pay taxes. Slashing the tax rates made it more practical to just go ahead and realize any income you can get. Since earning an anomalously high income is -- obviously -- itself anomalous, it stands to reason that a high percentage of the highest incomes were due to one-shot gains, whether from cashing in on options in a company after an IPO or a vesting, making a huge trade in the market that pans out impossibly well, or simply making the deal of a lifetime in a business arrangement. Any disagreements? Other possible explanations? This is pretty interesting macroeconomic data, so I'd love to hear more thoughts.

patio11 15y ago
A major portion was an IRS rule change which made it less tax efficient to do conspicuous consumption on the company dime. Japan has a treatment closer to the old way, and Japanese CEOs have wages which are not too dissimilar to American engineers but lifestyles which are similar to American CEOs. (e.g. Want a private flight to a vacation in Europe? That can be arranged, sir.)

lbarrow 15y ago

This sort of article is why serious people tend to roll their eyes when the Wall Street Journal comes up. Their agenda -- to humanize and sympathize with the 1% -- could not be more obvious. Why should I feel bad for someone who describes losing their $100m house as heartbreaking?

jimbokun 15y ago
You must have read a different article. The article I read went to great pains to point out the staggering extravagance of many wealthy people in the U.S. EDIT: I mean "Versailles"? Seriously? Like just building the largest residence in the U.S. wasn't ostentatious enough by itself?
- lbarrow 15y ago
  I suppose it's dependent on how you read the article. I assumed that we were supposed to be sympathizing with these people -- although we both realized how ridiculous that would be.
  - wanorris 15y ago
    I started off sick at my stomach at the same thing you were complaining about -- the sad story of this unfortunate woman losing her 90,000 square foot house. But it became pretty clear that while they weren't mocking her to her face (which would be mean no matter who she was), they definitely weren't expecting everyone to sympathize with the plight of the extremely wealthy. They make this point most clearly here: > Of course, the trauma of giving up a Gulfstream or a yacht can't compare with the millions of Americans who have lost their only job or home. The Siegels will make do in their current 26,000-square-foot mansion.
seagreen 15y ago
I don't see anything wrong with humanizing the 1% given that they are, in fact, human.

vinhboy 15y ago

Which do you think happened first? Firing half of his work force, or deciding to finally put his house on the market. That's a pretty important distinction. In time of stress, who gets sacrificed first? Your employees or your luxuries? Also --- "from the Occupy Wall Street protesters in New York to the tax battles in Washington, portrayals of millionaires and billionaires are being shaped more by partisan ideologies than economic realities" --- really? Thousands of people in LA lining up to receive free health care because they are insured is "partisan ideologies"? What is "economic realities" then? The price of a Gulfstream?

joshmlewis 15y ago

I was browsing through real estate in SF the other day and saw a few mansions. I like clicking through the pictures and seeing what that kind of lifestyle would look like. At a price tag at 20mil and amazing views you'd think you'd be happy there but then I looked up the monthly payments for a 30 year loan and they would be 80,000 month. I was shocked and baffled at how someone could be ok spending that much money a month on a house. Who can afford this? You think of the common stereotypes but really who could do this. Someone list some names and what they did beside the mainstream people.