Forum Post: The Real Question: WHY Don’t People Make Enough to Pay Income Taxes?
Posted 11 years ago on Sept. 22, 2012, 2:01 a.m. EST by notaneoliberal
(2269)
This content is user submitted and not an official statement
This is from Economy in Crisis:SEPTEMBER 20, 2012 DAVE JOHNSON 4 COMMENTS
Mitt Romney was caught on video complaining that 47 percent of us don’t make enough to pay taxes, believe they are victims, are dependent on government, etc. The right question is why do so many of us make so little?
Moving Jobs To Places Where People Don’t Have A Say
You often here that competition due to “globalization” means that we have to accept lower wages and fewer benefits, because people “over there” make so much less. What has caused the pressure, however, is “free trade” agreements that allow companies here to close factories here and open them over there, and then bring the same things they used to make here to sell in the same stores. The only “trade” involved in this transaction is trading who does the work.................. http://economyincrisis.org/content/the-real-question-why-dont-people-make-enough-to-pay-income-taxes
Good article. Labor and the environment under globalization have become a Capitalist's wet dream, externalities.
Precisely so.
Need a Chuckle? Enjoy:
In case you missed it, Wednesday night on The Daily Show, Jon Stewart delivered what may be the best 10 minutes and 27 seconds you'll see on TV this entire campaign season. Stop what you're doing and watch it now!
Keep fighting, Chris Bowers Campaign Director, Daily Kos
Welcome to bullshit mountain. lol
Very appropriate - Hey?
yep
similar to americans being given a chance through the lottery by obama
Globalization is a big part of it, but so is outright greed. Capitalism enables this greed because a basic fundamental aspect of it is that it must exploit labor productivity to earn a profit. This is all fine and well so long as the worker has some power to set his wage. We need a government to place checks and balances on capitalism so that workers have some power. Workers have little power today, hence decreasing wages. Our government has failed miserably to protect it's flock.
Tariffs did help "protect " the flock. The strategy of avoiding labor laws is called "labor arbitrage". Allowing this has greatly contributed to the reduction of worker power.
"When we allow our companies to close factories here, where people have a say, and move them there, where people don't have a say, and then bring the same goods back here to sell, we are allowing them to escape the borders of democracy."
nicely said
Amen, brother. Good post.
money is drained from the system through debt interest
there is never enough money in the system
though they say those competing for what is enough should go on competing
Well said, sir.
"The only 'trade' involved in this transaction is trading who does the work..........."
Thank you; but I can't take the credit. Those were the words of the author of the article.
Good Post
Thanks.
Although globalization exacerbates the problem, it is not the reason why most workers are broke.
Only some work can be outsourced. So even if you eliminated the free trade agreements, you would still have enormous income inequality and an enormous segment of the population that is broke.
The problem is capitalism and the way it allocates income.
In capitalism, half of all income gets paid to a small handful of gamblers who got lucky investing in the market and most of what remains gets paid to a small handful of people who have bargaining power merely because they are unique like athletes and celebrities.
The vast majority of the workers who produce everything, the engineers, construction workers, factory floor workers, doctors, miners, farmers, teachers, have to fight over the few crumbs that remain.
Even though worker productivity is $65 per hour, enough to make every worker wealthy, most workers are broke because they only get paid a tiny fraction of the $65 per hour they produce. They get a very, very bad deal in capitalism.
The only fair system is one which pays workers 100% of the income since they do 100% of the work (no income should be paid to investors, workers shouldn't have to work 6 months every year just to pay off the gambling winnings of investors) and that income should be allocated based on how hard you work. Capitalism's system of paying you based on how lucky or unique you are is not a fair system.
If you and I both work 40 hours, we should both get paid the same amount. The only fair reason for you to get paid more than me is if you worked harder. And the way you pay people based on how hard they work is by limiting differences in income to only what is necessary to get people to do physically or mentally difficult jobs and to get people to give their maximum performance in performance based jobs.
If we allocated income that way, we would be able to pay every worker from $115,000 per year to $460,000 per year as explained here. Everyone would be wealthy. Workers would get paid fairly and none of them would be broke.
Yes, I've read this post. While I applaud your goal to achieve greater pay equality, You don't understand the meaning of the $65 worker productivity figure. That is not a net profit figure. But that is another issue. The counter to the lack of bargaining power that you allude to, has historically been organized labor. Outsourcing-offshoring is a tool that has been used to undermine that bargaining power, as the article explains. if you look to history, before the destruction of protectionism, when union participation was high, there was much less wealth disparity. Check the statistics; 1950-1970.
"You don't understand the meaning of the $65 worker productivity figure. That is not a net profit figure."
I am an economist. I used to work for the Fed and as an investment banker. I can assure you that I understand worker productivity!
Worker productivity is not net profit. It is the price of all final goods produced by workers divided by total hours worked.
(The official worker productivity number reported by the BLS will be slightly lower than GDP/TotalHoursWorked because the BLS deducts from GDP the price of things that cannot be improved by more efficient labor such as renting a tractor)
And since GDP equals Total Income paid out (total income paid out means all forms of income paid to everyone including wages, profits, interest and rent), another way of calculating Worker Productivity is to divide Total Income paid out by total hours worked.
You can easily verify all these claims yourself.
Here is a wiki article that explains why GDP is equal to the total income paid out.
Here is the government's BEA report on how much total income people were paid in 2010 from all sources including wages, profit, interest and rent. It was $14.5 trillion.
Here is the government's BEA report on what the GDP was in 2010. It was also $14.5 trillion because GDP = Total Income.
Here is the government's BEA report on how many total hours we worked in 2010. It was 222,736 million hours.
When you divide $14.5 trillion by 222,736 million hours, you get $65 which is what workers would get paid if all income was paid to workers and they were paid equally. It is the average income per worker (or what the amount of income/GDP each worker produces on average).
And here you can verify that worker productivity (the amount of income/GDP each worker produces on average) is just slightly less than $65 as reported by the government's BLS.
.
"The counter to the lack of bargaining power that you allude to, has historically been organized labor"
I agree. What this country needs is organized labor.
Organized labor is a socialist movement. Socialists believed that the way to transition from capitalism to socialism is by organizing workers into a union and demanding it.
Since the more numbers you have the more bargaining power you have, I (along with the rest of the socialist movement throughout history) believe workers should organize into a single union and demand that they get paid 100% of the income since they are doing 100% of the work and demand that the income be allocated based on how hard you work. That is the only fair deal for workers.
That, of course, would be a revolution. So capitalists have done everything to prevent workers from organizing and taking control of the economy and society that the few rich people currently rule, including making it illegal for unions to be political.
What we need to do is educate workers on these simple facts and organize them into a union so they can get paid fairly.
Although I also applaud your effort in contributing to that education, workers should understand that they aren't just losing income to the competition abroad. They are also losing it to the competition at home. And the only way to win that competition is to get the bargaining power found in being organized in a single worker union.
Although there was less income inequality before globalization, there was still enormous inequality that left a huge segment of society broke.
Gentlemen, I'd like to add some needed simplification here.
--------Outsourcing to wage slave nations simply puts the workers (laborers) of the nation doing the outsourcing that much closer to being slaves themselves---------
If company's A and B make the same products and company A outsources, then company B has no choice but to do the same if they want to compete. The workers at both Companies A and B now have to look for new jobs unless they want to agree to work for about $2.00 / day.
This may be like hearing that the sky is blue, but it is the ultimate; bottom line truth here. We are talking about wage disparity and income inequality.
I love the following definition of economics: Economics is "WHO gets WHAT" All economic discussions can be ultimately traced back to this simple phrase.
$10,000,000,000.00 in the hands of 3 people doesn't do a fraction of the same amount for the economy as it does in the hands of 10,000 people.
K.I.S.S. keep it simple.......
Yes, in capitalism, your income is determined by how much bargaining power you have in the market. Competing against workers who are willing to get paid $2 per hour will force you to have to work for $2 per hour.
But American workers are not just losing income to competition from foreign workers. They are losing half their income to American investors and most of what remains to a few workers who have bargaining power because they are unique like athletes and celebrities.
The only fair economic system for workers is one which pays workers 100% of the income, since they do 100% of the work, which pays no income to investors since they do no work, and which pays you based on how hard you work, not based on how lucky or unique you are. That economic system is called socialism and is explained here.
If we allocated income this way:
We're hurting now because of what's happened to our base...that is our "Middle class". NOT because of anything that's happened to the ultra rich. They can keep their wealth and we can still have a great economy.
What has happened though is that a large enough percentage of "middle class " people / consumers / spenders have been trampled down financially / economically and thus they can no longer consume / spend and thus the economy spirals downward.
This is exclusively attributable in my opinion to free trade / outsourcing. We have literally mixed the middle class of the greatest economy in the history of the world with countries that still practice 3rd world / almost slave like conditions. When you do that , we can't sustain it forever.
Real wealth is generated in M A N U F A C T U R I N G ( tied to consumption of manufactured goods.. I hope you can see the whole picture). And when that wealth; represented in dollars; is fairly distributed to the workers, you create a strong, healthy middle class.
We have allowed the manufacture of what we consume to be done by people who are almost slaves and the worker in this country is now reduced to mowing yards, folding sheets in a hotel etc.
actually, I completely agree with you in regards to labor organization / unions. That's pretty much the same thing that I'm talking about.
"I am an economist. I used to work for the Fed and as an investment banker. I can assure you that I understand worker productivity" - usually those qualifications would mean that you do not understand the real economy but being a socialist might mitigate that! i was drinking italian wine in 1970 so while i understand the term globalization stands for what has happend (roughly) since reagan it is a bit misleading. i am with both of you here but unions are not the end point - worker control (ownership - the movie "the take" by naomi klein is very interesting on that subject) should be the point then a move to production for use and not for profit. do you know of upton sinclair's book "i,governor of california" - hsi slogan was EPIC - The EPIC plan was based on Sinclair's proposal that the state of California take over idle factories and farmland, which would then be run as cooperatives in the theme of production for use, instead of production for profit. The idea was to use these cooperatives to put the unemployed back to work. To run the cooperatives, Sinclair proposed the formation of an agency to be called the California Authority for Production. The proposal received widespread attention, and supporters formed EPIC clubs to promote it.
Well, we are probably more on the same page than not. I don't dispute that pre globalization conditions were less than perfect, but the difference in income equality between then and now was what I would consider highly significant. I would not pretend that reining in globalism would be the end of the struggle, but would be a helpful step. Of course, capitalists have attempted to thwart organizing in any way they can, and "labor arbitrage" has been a very effective tool.
Agreed.
Unfortunately, the only unions attempting to organize all workers into a single union so that they have maximum bargaining power remain on the fringe.
I'm not absolutely sure if a single union is the best solution or if that would tend to create too much distance from the individual. It may be a good idea if properly structured.
Being a member of a union with a million members is probably not much different for the individual than being a member of a union with 100 million members.
It just gives you greater leverage.
The steamfitters will have greater leverage if the carpenters, teachers, iron workers, cab drivers, etc. also backed their demands and were willing to strike with them.
You have a point. In times past, there was a degree of solidarity between unions.
very good post - i thought you might be interested in my response to our friend from alpine (an extremely wealthy community in nj - an extremely wealthy state!) ..........."I am an economist. I used to work for the Fed and as an investment banker. I can assure you that I understand worker productivity" - usually those qualifications would mean that you do not understand the real economy but being a socialist might mitigate that! i was drinking italian wine in 1970 so while i understand the term globalization stands for what has happend (roughly) since reagan it is a bit misleading. i am with both of you here but unions are not the end point - worker control (ownership - the movie "the take" by naomi klein is very interesting on that subject) should be the point then a move to production for use and not for profit. do you know of upton sinclair's book "i,governor of california" - hsi slogan was EPIC - The EPIC plan was based on Sinclair's proposal that the state of California take over idle factories and farmland, which would then be run as cooperatives in the theme of production for use, instead of production for profit. The idea was to use these cooperatives to put the unemployed back to work. To run the cooperatives, Sinclair proposed the formation of an agency to be called the California Authority for Production. The proposal received widespread attention, and supporters formed EPIC clubs to promote it.
If all the workers are in another country, might be time that the unions set up camp there, and we outsource our politicians to that country.
Makes sense to me. I'm sure it wouldn't cost as much to bribe the guys over there.
I would welcome the idea of workers organizing "over there", but in many cases, they are met with brutal repression. Outsourcing our politicians? If only....
Congress currently has an approval rating of less than 85%. The only thing that would happen if they were all shipped to Siberia is........(drum roll) .............Nothing.
Wise up, America. Top-heavy lobbyist-funded reps are not what you need.
"Nothing"? Maybe a nationwide celebration.
Identify what each of them actually do.
It won't take more than a couple of hard workers to replace them all.
GO HERE to find all the details of the Romney plan to save America: http://www.romneytaxplan.com/
What does that have to do with the subject?
Extrapolate. Taxes, get it?
Well. first, Romneys tax plan is a fantasy. Second, taxation, other than tariffs, has no significant effect on out sourcing. So what's your point.
Can't help, sorry
Exploitation of people that all but beg for a paycheck, and some that would, and some that do.
The answer is no more complicated than the word 'Exploitation'.
This is a really good question but what I suspect is that liberal administrations have incorporated enough "credits" for being poor to allow tax payers to adjust the table downward.
A high school student today, living with parents, is taxed at anything over what, about $4500? Why, when those that are married with children who have incomes in the $30k range, pay nothing? We're teaching middle class children that they must contribute, but we're making allowances for adults? Why are we doing that? Everyone should pay Federal income tax, if not those that don't will certainly determine to take far more than their share.
Apparently, you didn't read the article. Get over your liberal hangup. The current administration is not economic liberal. It is, as have all since Reagan, NEOLIBERAL. When you learn what that means, come back and chat.
I did read that article. And I don't care how you label my mind; I don't buy the liberal mantra that the poor should not pay federal tax or the excuse that they do pay other taxes - they should pay at least 8 - 10% in federal taxes, just as they did 30 years ago, or they should be denied the right to vote.
I think they should pay taxes too. They just shouldn't be asked to compete with 4$ a day, or less, slave labor. You, of course, overlook the fact that the workers are the ones that actually created the wealth that the investor gained by merely owning capital.
I don't overlook it - in the early 1970s I worked for 5 bucks a day; later for 15 bucks a day, and I had many years at 20 and 25 bucks a day - that's per day, not per hour - do the math.
And my generation had it far easier then the previous generation, which also payed taxes.
Everyone should pay federal taxes.
So when you made $5 a day, how much tax could you afford to pay? Some generations had it worse, true, but if you began your work history in the early 70s, you just missed the period of the greatest income equality the US had ever had.
It was never a question of how much we could afford to pay - the working poor paid 8 to 10% in federal tax, and that is not withholding which was significantly higher in the 70s.
Missed the income inequality, you're talking pre-70's? Post WWII was one of our greatest economic time periods, as we industrialized everyone found employment. Housing and transportation was also cheaper relative to income. This post WWII skilled labor employment, though, is what permitted the birth of our working class comfortable and our middle class. We created the products, and the infrastructure, but others created the wealth. And then they created investment vehicles for our newly acquired disposable income. Gaining wealth has always been a communal project and we label this "prosperity."
The generation previous suffered the Depression; their stories of hardship are incredible.... the 20's were relatively prosperous... we can continue this backward measure of prosperity indefinitely to the early 1600s and beyond.
A school teacher in PA currently receives 57% of his or her paycheck... the rest is taken in withholding - federal and state tax, fica, medical and retirement contributions, union dues, etc... in NY the average is about 60 - 65%. But we are approaching the point where it no longer pays to work. Soon we will be the 47% who pays no taxes and begs of government generosity.
Everyone, even the welfare recipient, should pay Federal tax. Or the 47% will use the vote to rape the treasury, which is the tax payer, augmented by dollars charged to future generations. And they will own Democrats, who need to distance themselves to insert some intelligence in government.
Whether we label ourselves as socially conservative Democrats or socially liberal Republicans, tax payers are all the same - no one buys into the "12 points" of their politics, as "12 Steppers," except the extremely twisted.
OK, just one sentence I need clarified. We created the products and the infrastructure, but others created the wealth. Hows that?
You can't grow business capable of employing tens of thousands without capital investment. And regionally, to grow prosperity, we need large scale employers. They created the products, they created the capability, they marketed the products - we are but a tool of growth. But, labor is negotiated commensurate with the fear of insurrection - we took a piece of that pie that also permitted us some relative prosperity. That money, for the most part, was spent locally and we in turn promote a regional prosperity.
Well first you said "we" created the products. Now you say "they" created the products. Which is it?
We as individuals may create a product but labor is but a resource; without capital investment industrialization would not have been possible. Thank the Rothschilds, they funded most of it. And these large scale employers, which increase wealth density, create regional prosperity. That prosperity paid for homes, cars, boats, conveniences, comfort - it put kids through college, it created "entitlement."
Well I guess it's a subjective judgement as to the relative importance of labor vs capital. Some might suggest it is capital that is the "but a tool of growth" and labor is the more significant input. I tend to favor the latter, as you might have gathered.
It's not really a subjective argument, to create a company large enough to import wealth sufficient to promote a regional economy, thereby "prosperity," requires capital. Even ground up, start ups, require capital. And those that invest that capital, even as owners, do so for some expected investment return.
This is the very reason, in part, that slavery has existed in our world - slavery as labor is a free resource. And in many societies, where sufficient capital was not available, slavery was an only option. This included America as well - there was insufficient species, without slavery no cash crop, necessary to import wealth, could have existed. To put it another way, the cash crop was not redeemed for cash but for an imperishable product which is of no value to those that must labor to eat - there was insufficient capital.
the wealthy tax the poor though rent. interest and inflating the value of what the poor produce with labor
Well, I can't disagree with the rent, interest part, but I was curious how yobstreet rectified the apparent contradiction in his/her statement.
We are gradually reducing the value of labor worldwide; this will progress until all are working at an absolute bottom rate of say, in dollars, one penny an hour, one penny a week, one penny a month, etc. This is "slavery" - work for free or die. But this is the world that Free Trade has created.
That's right. Doesn't leave much of a consumer base.
No but it works in the sense of profit which has a narrow window of opportunity. And a corporate entity that turns the quest for profit into their employ lives for opportunity.
You're right, and that consumer base at present is us, but eventually China will be the consumer base.
there are more people than work that needs be done
I think you should read this. http://jobsearch.about.com/cs/careerresources/a/offshore.htm
what does it say?
What, you have an aversion to clicking on a link? It explains where tens of millions of US jobs went.
I am not a Nationalist
profit is always looking for ways to produce with fewer workers
Productivity increases don't cause systemic unemployment. That's the Luddite fallacy.
http://en.wikipedia.org/wiki/Technological_unemployment
it's not a fallacy
the premiss of the "Luddite fallacy" is that there is always a frontier to further exploit
the earth is a closed system
those that own the means of production end up in control of the resources
That idea is not founded in the study of economics. You just feel it to be true, which makes it "truthiness".
economics is derived from the word ecosystem
That's your explanation for how technological unemployment leads to systemic unemployment, contrary to the conclusions of people who actually study these things for a living? Etymology? Not a very compelling argument.
technological unemployment leads to collection of land and resources to those that owns the means of production
How? That's just truthiness unless you have some kind of explanation.
Yeah, I think we may have had this discussion before. I don't think you get how jobs come into existence.
how do jobs come into existence?
They come into existence when large numbers of people have expendable income. That creates a market for products. When there is demand, it tends to be supplied.
where does that money come from ?
You tell me, or are you unaware that any new jobs have ever been created in the history of mankind? If you believe they have where did the money come from?