Meet the new class traitors who are coming out as rich The Guardian is a leftist progressive newspaper and true to its illiberal moorings it finds wealth despicable, and inequality evil. The Guardian believes that all men should have an equal outcome regardless of equality of opportunity. More below. "Schoenberg is part of a group I call “the transparent rich”. He is also in an organization that is similarly interested in transparency, the Patriotic Millionaires. The website describes members as “traitors to their class”, and then elaborates: “Patriotic Millionaires are high-net-worth Americans, business leaders, and investors who are united in their concern about the destabilizing concentration of wealth and power in America.' * * * And like others before him, he is coming out now because he sees a grave need for social transformation." No, he is coming out because it massages his ego. He believes you and I and all below him inferior beings who without his White Knight help will founder on the dangerous shoals of the economic model. This is ego massage writ ugly and large; it has nothing to do with reality and, in fact, is antagonistic to reality. We see it in the promulgation of most of the arrogant rich. Like Elon Musk, Richard Branson, and Mark Zuckerberg's love for Basic Universal Income which is just an attempt to lock the poor into a rigid government controlled payment system while lowering opportunity for the lower 40% of the population to escape from this trap, this tar baby if you will. These men and the man in the Guardian story all sound like they want what is best for the poor, but they do not, they want to keep the poor from spinning off competition for their children, to assuage their conscience when it comes to their wealth, and to ensure the poor have some ability to continue to buy and use their products, er, make them wealthier. "'I believe today’s tax proposals will cut taxes on very rich people, and that’s why I posted some of my tax returns online,” says Schoenberg, perhaps referring to Donald Trump’s recent call to repeal the estate tax altogether, as well as Republican plans to cut the corporate tax rate. “Look, if you are uncomfortable about where society is and want to make a difference, this is one way you can.” By coming out as rich, these affluent progressives are starting to expose their own positions, advocating greater equality in the process. You might call them “class woke” (and I don’t mean that entirely ironically). They hope that they can help bring about change, at least a little." Only socialist birdcage liner of a "newspaper" could fall for this twaddle. First, just the rich in American can benefit from tax cuts because only the rich pay any significant amount in taxes. The bottom 50% of the income taxpayers pay only about 2.78% of the taxes. It is impossible to cut taxes and give them any meaningful tax cut; zero is after all zero. Summary of the Latest Federal Income Tax Data, 2015 Update - Tax Foundation Let's go through the amount of taxes paid to see why only the rich can receive tax cuts in any meaningful amount. The top 50-25% pay 10.94% of taxes, the top 25-10% pay 16.47% of taxes, the top 10-5% pay 11.25% of taxes, the top 5% pays 58.55% of the taxes. Notice how the share of AGI is much greater than the share of taxes paid up through the top 5% of income, and it is only above that when the share of AGI is smaller, and notice how disproportionate it is at the top and bottom levels. For example The AGI divided by Share of Income Taxes Paid for the bottom 50% is 4.13 time, while for the top 1% is a negative 2. If we define wealthy as the top 10% of taxpayers, they pay 69.8% of the taxes. While it is possible to cut the taxes of those below this level, it is dangerous to limit the tax receipts to a tiny fraction of the population. The Europeans understand the danger, and this is why they tax the poorest and wealthiest parts of the population with similar income tax levels. What this means is the European nations income tax rates are not very progressive, everyone pays nearly the same rate, this is not so in America, our income tax rates are highly progressive, the most progressive in the world. How Scandinavian Countries Pay for Their Government Spending - Tax Foundation "In addition to making people more aware generally of a preferential tax code, more transparency about inherited wealth might help middle-class or working-class people feel less self-critical after they realize the hidden advantage of others. It would underline how taxes enable and a whole societal structure rewards the wealthiest. It may also help people without such resources to see that they aren’t “doing it wrong”, and stop them from blaming themselves when they are struggling. After all, an estimated 35% to 45% of wealth is inherited rather than self-made. The Brookings Institution’s Richard V Reeves and Kimberly Howard have called this a “glass floor”, one element that protects the wealthiest from ever losing their mobility." These paragraphs make no sense to anyone who understands what is going on. The wealthy do not have some hidden advantage unless advantage means something like "They pay all of the taxes, so the bottom three quarters need pay nothing significant." Even Warren Buffett becomes confused by these ideas, but then he is an investor, not an economist. It is the taxes paid which matter, not the rate. The entire social structure rewards the people at the bottom; they do not pay anywhere near their fair share, they also take vast amounts from the government in payments which should be understood but is not. The second paragraph is equally stupid. The wealthy in America have no floor. While it is true that wealth does offer some protection since most mere mortals find it difficult to spend a huge Warren Buffett fortune in a single lifetime, the wealth accumulated never lasts. The people following the great wealth builders are never as capable as the wealth builder. The real issue is income mobility, not wealth since it is income and the ability of individuals to move between income quintiles which allow people to change their lifestyles, live better, and build wealth. "Thanks to James Pethokoukis for his ongoing efforts to cite empirical evidence that exposes many of the myths about “exploding income inequality” and “wage stagnation” in America (see recent posts here, here, here, and here).In an editorial in Investor’s Business Daily last year, Thomas Sowell made this insightful comment about the issue (emphasis added): Only by focusing on the income brackets, instead of the actual people moving between those brackets, have the intelligentsia been able to verbally create a “problem” for which a “solution” is necessary. They have created a powerful vision of “classes” with “disparities” and “inequities” in income, caused by “barriers” created by “society.” But the routine rise of millions of people out of the lowest quintile over time makes a mockery of the “barriers” assumed by many, if not most, of the intelligentsia." By intelligensia, he includes articles like this Guardian twaddle. "As I reported on the Enterprise Blog last March, the dynamism of the U.S. labor market that Sowell describes is generally underappreciated, and has received almost no attention from those complaining about income inequality and stagnant household income. Contrary to prevailing public opinion that households get stuck at a given income level for decades or generations, there is strong empirical evidence that households move up and down the economic ladder over even very short periods of time. For example, recent research from the Federal Reserve Bank of Minneapolis is summarized in the table below, based on income data from the Panel Study of Income Dynamics that followed the same households from 2001 to 2007. The empirical results answer the question: For households that started in a given earnings quintile (20 percent group) in 2001, what percentage of those households moved to a different income quintile over the next six years?" Explanation of how to read the chart is below: "1. Looking across the first row of data in the table from left to right, we can see that for those U.S. households that were in the lowest earnings quintile (bottom 20 percent) in 2001, only 56 percent of those household remained in that same income quintile six years later in 2007, and almost half—44 percent—had moved up to one of the four higher income quintiles by 2007. Five percent of the lowest-income households in 2001 had moved up to one of the top two quintiles by 2007. 2. Looking across the fifth row of data from right to left reveals that of those households in the highest earnings quintile (top 20 percent) in 2001, only 66 percent remained there six years later and 34 percent had moved down to one of the four lower income quintile by 2007. Five percent of those highest-income households had moved all the way to the bottom income quintile in only six years. 3. For those households in the middle-income quintile in 2001, 42 percent remained in the same quintile in 20007, about one-third (32 percent) moved to a higher-income quintile, and slightly more than one-fourth (27 percent) moved to a lower-income quintile. 4. The bottom row in the chart shows that for households in the second, middle, and fourth income quintiles in 2001, more than half of each group moved to a different earnings quintile by 2007 (61 percent, 58 percent, and 55 percent, respectively). It is true that the top and bottom quintiles are the stickiest. This should be expected. The top contains some of the wealthiest people in the world, and it is challenging to dissipate such wealth in just a few years. It is equally likely that most of the people in the top quintile are not only income "wealthy, " but have wealth and savings as well, and this insulates them some as well. The bottom suffers a different but equally "sticky" problem. Often people find themselves in the bottom quintile because they have made bad decisions. Decision-making skills are not learned overnight they take time. After all, an estimated 35% to 45% of wealth is inherited rather than self-made. The Brookings Institution’s Richard V Reeves and Kimberly Howard have called this a “glass floor”, one element that protects the wealthiest from ever losing their mobility." So, approximately 40% of the total wealth is inherited, and there is high mobility between the income quintiles including the top and bottom over quite short periods of time. This makes a mockery of the ideas espoused in the Guardian article. They can only be adopted because so many do not understand the basic facts and the Guardian author takes great pains to keep her readers from understanding these facts. Such are the requirements for the socialist war on reality. It must be fought through lies, not reality. "For the liberal well-off in particular, “having money is a source of shame”. The people she interviewed with inherited wealth were also, on some level, embarrassed that they hadn’t worked for it. Perhaps because they were progressive, they also often had people in their lives with less money than they did. As a result, they were often pretending they were not as rich as they were, “hiding their heads in the sand about it”. “The fact that they have wealth goes against their politics,” Sherman said of her subject. “They want to be ‘morally worthy’ of being wealthy, to be prudent, to not be greedy and ostentatious.'" Relax, they will either squander it or dilute it substantially, here is why: The Pareto distribution. Pareto distribution Concerning human productivity, and it does not matter in what area of expertise whether music, law, business, or other, it always holds true, it is The Iron Law of Human Productivity. In a nutshell, this is how it works: In any organization or group, the square root of the total number of individuals will produce one half of the output. So, in a business of ten employees, three will do half the work; in 100, ten will do half the work; in 1,000, 31 will do half the work; in 10,000, 100 will do half the work; in 100,000, 316 will do half the work. The chance that the children of the initial wealth builder will be one of the tiny few at the high end of the Pareto Distribution is vanishingly small, zero for all practical intents and purposes. So, unless wealth can be trapped and not expended, which is the idea behind the Feudal economic model (socialism is just the Feudal economic model applied to the industrial economy, and renamed) the wealth will be dissipated by the children, and grandchildren of the wealth builder. In the US, the mobility between the economic quintiles is what allows this dissipation and replacement of individuals at the top, and throughout the economic income and wealth spectrum. Which brings us back to Musk, the wealthy, and the man at the center of the Guardian article. Most may not understand the Pareto Distribution, but these men do, they are continually looking for the tiny few people who are at the pinnacle of the Pareto Distribution, and they understand their children are highly unlikely to be there. They are attempting to weld the lowest quintile in place, which is what Feudalism, nee, socialism, must do to fix the wealth in the hands of the few families who hold it today. This is what dictators and socialists always attempt to do. "As Sherman put it, “The question is not, ‘Do individual wealthy people deserve their wealth when they aren’t Kardashians?’ but, ‘Does anyone deserve this much wealth?’” This statement is evidence of the envy of the low productivity individual. They believe they "work hard" but do not have anywhere near the wealth of some around them, and they are frustrated and envious. Why not just take this wealth from them, they've not earned it. But if we return to the Pareto Distribution we see that indeed, someone did earn it and without those someone's we would be very much worse off. Milton Friedman discusses how and why the Estate tax is deeply damaging to society. "But so many interpret their struggle to get by or to thrive economically as a private failing, rather than at least partially a system error. The transparent rich want to make the point that hidden family wealth, including great resources from inherited assets and investments, can take a real toll. After all, if more Americans who benefited from a stacked tax code “came out”, who knows what might be achieved."
The private failing these people feel is the obvious and direct comparison between their productivity and their predecessor's productivity. They do not and cannot compare favorably to these incredibly productive individuals. It is difficult to follow behind a productive parent because the following generations are so likely to be demonstrably less productive. There is nothing so discomforting as being directly and accurately compared to someone who is highly productive. Not someone who looks busy, but who is productive. Our society today often rewards those who look busy, those whose appearance is representative of productivity. But these are not necessarily productive people. The "New Class Traitors" are not traitors at all but ashamed of their lack of productivity, their understanding that they did nothing to merit their wealth and their lifestyle is a boon given by another. Regardless, if we want our economic system to thrive, we need to let this continue with the following generations holding money in productive investments while slowly dissipating the corpus of wealth. Friedman is correct, changing this will result in the slow but steady destruction of the economy, due to a shift in how the truly productive address wealth, savings, and investment. No socialist economy has been successful. This is because socialists always greedily kill the Golden Egg laying Goose instead of merely allowing it to continue to lay the eggs. The "New Class Traitors" are the newest crop of useful idiots in service to the fools and charlatans who are the authoritarian socialists, in this case, represented by the Guardian, and its author.
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