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Posts Tagged ‘Charmaine Marriott

How much your earning grew in the last 3 decades?

The Congressional Budget Office reported that average inflation-adjusted after-tax income grew by 275 percent for the 1% of the population with the highest income. For others in the top 20 percent of the population, average real after-tax household income grew by 65 percent.  By contrast, the poorest fifth of the population, average real after-tax household income rose 18 percent.  And for the three-fifths of people in the middle of the income scale, the growth in such household income was just under 40 percent.

These numbers or ratios and percentages hide the magnitude of the problem.  For example, suppose a household was earning $40,000 three decades ago, and this earning after-tax was considered more than sufficient for the standard of living at the time, do you believe that earning $55,000 today has the same value in standard of living?

I don’t know how the Congressional Budget Office computed the “average inflation-adjusted” thing, but I suspect this value is vastly under-reported.  For example, inflation since the end of WWII was consistently maintained at 4% every year, simply to wipe out by 50% the huge debt incurred during the war and the subsequent large federal budgets.  It appear that after the 1980’s, this inflation was reduced to 3% for political reasons.  A 3% inflation rate over 30 years is not just 90% to adjust, but it is cumulative.  Do the math, since you know that 10% interest on credit card expenses easily reaches 30% by the time you managed to pay off your debt, if you ever could manage it.  The real inflation-adjusted rate in the last three decades could easily be over 200%.

Maybe the top 20% richest classes maintained the same standard of living, but the lower middle class and the poorest class have witnessed drastic lowering of their standard of living, regardless of the fictitious increase that the report would like you to believe. These numbers obviously exclude owners of enterprises and the members of their board of directors who are paid on total revenues and not on after-tax profit.

This introduction is in response to the article published by ROBERT PEAR in the New York Times, under the title “Top Earners Doubled Share of Nation’s Income, Study Finds” (with slight editing and rearrangement):

“WASHINGTON — The Congressional Budget Office , in a new report, said Tuesday: “The top 1 percent of earners more than doubled their share of the nation’s income over the last three decades…Government policy has become less redistributive since the late 1970s, doing less to reduce the concentration of income…”  This report is likely to figure prominently in the escalating political fight over how to revive the economy, create jobs and lower the federal debt. 

Hans Pennink/Associated Press.
Charmaine Marriott was a long way from Wall Street, but sympathy for the protesters there led her to make her own statement in Albany last week.

The budget office said “The equalizing effect of federal taxes was smaller in 2007 than in 1979 as the composition of federal revenues shifted away from progressive income taxes to less-progressive payroll taxes…Federal benefit payments are doing less to even out the distribution of income, as a growing share of benefits, like Social Security, goes to older Americans, regardless of their income…”

The report, which was requested several years ago, was issued as lawmakers tussle over how to reduce unemployment, a joint committee of Congress weighs changes in the tax code and protesters around the country rail against disparities in income between rich and poor.

The budget office found that from 1979 to 2007, average inflation-adjusted after-tax income grew by 275 percent for the 1% of the population with the highest income. For others in the top 20 percent of the population, average real after-tax household income grew by 65 percent.

By contrast, the poorest fifth of the population, average real after-tax household income rose 18 percent.  And for the three-fifths of people in the middle of the income scale, the growth in such household income was just under 40 percent.

The findings, based on a rigorous analysis of data from the Internal Revenue Service and the Census Bureau, are generally consistent with studies by some private researchers and academic economists. But because they carry the imprimatur of the nonpartisan budget office, they are likely to have a major impact on the debate in Congress over the fairness of federal tax and spending policies.

Factors contributing to the rapid growth of income at the top were the structure of executive compensation; high salaries for some “superstars” in sports and the arts; the increasing size of the financial services industry; and the growing role of capital gains, which go disproportionately to higher-income households.

Higher-income households got a larger share of the pie, while other households got smaller shares. Specifically the report made these points:

1) The share of after-tax household income for the top 1 percent of the population more than doubled, climbing to 17 percent in 2007 from nearly 8 percent in 1979.

2) The most affluent fifth of the population received 53 percent of after-tax household income in 2007, up from 43 percent in 1979. In other words, the after-tax income of the most affluent fifth exceeded the income of the other four-fifths of the population.

3) People in the lowest fifth of the population received about 5 percent of after-tax household income in 2007, down from 7 percent in 1979.

4) People in the middle three-fifths of the population saw their shares of after-tax income decline by 2 to 3 percentage points from 1979 to 2007.

On Tuesday, the White House endorsed another bill, which is likely to be passed by the House this week with bipartisan support. The bill would repeal a requirement for federal, state and local government agencies to withhold 3 percent of certain payments to suppliers of goods and services and to deposit the money with the Internal Revenue Service.

This requirement was originally adopted as a tax-compliance measure, and the Congressional Budget Office said its repeal would reduce federal revenues by $11 billion over 10 years.

House Republicans would offset the cost with a bill that reduces federal spending on Medicaid under the 2010 health care law. The White House said it supported the bill, intended to fix an apparent error in the law, under which hundreds of thousands of middle-income early retirees can get Medicaid coverage meant for the poor.

The joint Congressional committee on deficit reduction is considering changes in a wide range of benefit programs.” End of article

Consider the following data:

Lower middle class American have only 6% left of their income, which is $55 a week, after the expenses on Housing,  Food, Gas and Transportation, and Healthcare are taken care of,  to cover other necessities in life, debt, and savings. For example,

In the past decade:

1. housing now accounts for 50% of spending

2. food has tripled

3.  gas/oil has doubled

4.  healthcare has doubled

Income is stagnant and has only risen by 17% . Double the amount of people are unemployed. Today, the average family of four:

Makes an income of $42,028 a year; spends 94% of income on housing, food, gas/transportation, and healthcare (HFGH); cannot afford to put enough money toward investments, savings, or debt/loan repayment.

Read https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0Bx--U8EuFM2WZGNlMTMxMjUtZjRiOC00NGZmLTgwZWItMWM1ZTA2M2IzZDNj

Note 1: The study was requested by Senators Max Baucus, Democrat of Montana and chairman of the Finance Committee, and Charles E. Grassley of Iowa, when he was the senior Republican on the panel. Representative Sander M. Levin of Michigan, the senior Democrat on the Ways and Means Committee, said the report was “the latest evidence of the alarming rise in income inequality.”

Note 2: House Republicans pushed back Tuesday against President Obama’s complaint that they were blocking bills to create jobs. Speaker John A. Boehner said he agreed with Mr. Obama’s new slogan, “we can’t wait,” and he said that 15 House-passed bills were “sitting over in the Senate, waiting for action.”

Representative Steny H. Hoyer of Maryland, the No. 2 House Democrat, said Tuesday that he was hopeful but not entirely confident that the panel would succeed in reaching a bipartisan agreement to reduce federal deficits by $1.2 trillion over 10 years.  “Hopeful is not confident,” Mr. Hoyer said.


adonis49

adonis49

adonis49

January 2021
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