Author Archives: Larry Franz

$59 in 45 Years!

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In case there was any doubt about the growth of inequality in America, a new study based on IRS data shows that:

Corrected for inflation, the average annual income of the bottom 90% of workers in 2011 was $30,437. In 1966, the average was $30,378. That’s an increase of $59 in 45 years.

Meanwhile, the average income of the top 10% almost doubled, rising from $138,793 to $254,864, an increase of roughly $116,000, while the average income of the top 1% rose by $628,000. For the top 0.1%, the increase was $18 million!

More recently, since 2009, the top 1 percent received 81% of  the growth in income. The top 0.1% received more than 50% of the growth.

The wealthiest Americans are pulling away from the rest of us because income has shifted from labor to capital, and because of lower taxes on capital gains, dividends, estates, and other income that is especially important to people with a lot of money.

Policies that especially benefit people with high incomes could be changed (in theory). Yet, in the words of economist David Cay Johnston:

“It has become widely understood that we cannot balance our federal budget by raising taxes only on those at the top, because there is not enough income there, even if we taxed away everything the top makes. What is equally true is that we cannot increase tax revenue if the incomes of the vast majority keep falling [or remain stagnant]. That, however, has yet to become part of the debate on how to finance government.”

http://www.taxanalysts.com/www/features.nsf/Articles/C52956572546624F85257B1D004DE3FC?OpenDocument

Sometimes Things Just Work Out

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I took our old car in for service at a local garage yesterday. It needed a couple of things done. The guy at the garage told me the work would cost about $450. He added that he was really backed up, so the car wouldn’t be ready until the end of the day. He seemed a little stressed out.

As I was walking home, it occurred to me that I really didn’t need the car right away. I figured it would be a nice gesture if I called the mechanic and told him he could finish the work the next day if he wanted.

It also occurred to me that it might be a good thing to do this guy a favor. I always feel like I’m at the mercy of car mechanics. Maybe this one would reciprocate by giving me a break when he wrote up the bill. 

So when I picked up the car today, it was very nice to see that the mechanic had charged me $250, not $450.

The world doesn’t seem so screwed up when you can do well by doing good (even if  you aren’t being completely selfless at the time).

Death and Taxes

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A recent article by Katherine Newman, a sociology professor at Johns Hopkins, highlights the effect of rising tax rates on the poor. She points out that for the past 30 years or so, many states in the South and the West have been raising sales taxes and fees for government services, both of which especially affect the poor. States in the Northeast and Midwest, on the other hand, have generally been more progressive in their tax policies, some even going so far as to create local versions of the federal Earned Income Tax Credit, which is specifically designed to assist people who don’t earn much money.

According to Professor Newman, the result of these policies, after correcting for other variables, like the local poverty rate, racial composition, diet and cost of living, is that there is a clear relationship between taxing the poor and “negative outcomes”, such as heart disease, infant mortality, dropping out of school, divorce, property crime and violent crime:

“The poor of the South — and increasingly the West — do worse because their states tax them more heavily. They have less money to buy medication, so their health problems get worse. High sales taxes make meals more expensive, so they shift to cheaper, unhealthy food. If people can’t make ends meet, they may turn to the underground economy or to crime.”

Partly for this reason, Southern and Western states receive more than their share of the federal budget (it’s not just because they have lots of military bases):

“Medicaid payments, food stamps, disability benefits — all of these federal programs swoop in to try to patch up a frayed safety net. Consequently, the Southern states reap more dollars in federal benefits than they pay in taxes (like Mississippi, which saw a net gain of $240 billion between 1990 and 2009), while the wealthier states — which do more to take care of their own — lose out for every dollar they pay (like New Jersey, which handed over a net of $706 billion over that same period)… We all pay for the damage done when states try to solve their fiscal problems, or score ideological points, on the backs of the poor.”

And yet the situation is getting worse, as states like Louisiana, Nebraska and North Carolina consider cutting income and corporate taxes, while raising sales taxes. 

http://opinionator.blogs.nytimes.com/2013/03/09/in-the-south-and-west-a-tax-on-being-poor/

Democracy by the Numbers

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For several years, I’ve occasionally driven back and forth between Vermont and upstate New York. The difference between the two states is always noticeable.

On the Vermont side of the border, everything seems neat and tidy and pleasant. There are billboards that say even the gas stations are nice in Vermont (I don’t remember seeing vases of plastic flowers in gas station restrooms in other states.)

The New York side of the border, however, which is equally rural, always looks shabby and rundown. The atmosphere in towns like Whitehall and Fort Ann is depressing. Every time I drive through there I wonder what the people do for a living.

So it was good to see confirmation of my assessment, and a possible explanation, in the New York Times: 

“In the four years after the financial crisis struck, a great wave of federal stimulus money washed over Rutland County (Vermont). It helped pay for bridges, roads, preschool programs, a community health center, buses and fire trucks, water mains and tanks… Just down Route 4, at the New York border, the landscape abruptly turns from spiffy to scruffy. Washington County, N.Y., which is home to about 60,000 people — just as Rutland is — saw only a quarter as much money.”

The Times suggests that the key difference between these adjoining regions is that Vermont, as a small state, has the same number of U.S. senators as New York, a very large state:

“Vermont’s 625,000 residents have two United States senators, and so do New York’s 19 million. That means that a Vermonter has 30 times the voting power in the Senate of a New Yorker just over the state line — the biggest inequality between two adjacent states.”

There are surely other reasons for the obvious discrepancy between Vermont and upstate New York, but it’s very likely that different levels of political representation are an important factor. States like Vermont and Wyoming (population 580,000) have the same number of senators as New York and California (population 38 million). That affects where the money goes.

Small states are even over-represented in the House. The representative from Wyoming has 580,000 constituents. The average representative from California has 720,000. Throw in the effect of gerrymandering in the House, which recently helped Republicans win 53% of the seats while receiving 48% of the popular vote, and it shouldn’t be surprising that Congress doesn’t reflect the will of the people.

http://www.nytimes.com/interactive/2013/03/11/us/politics/democracy-tested.html?pagewanted=all

Monogamy and Its (Dis)Contents

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Monogamy is a short book by the English psychotherapist Adam Phillips. It contains 121 extremely brief chapters on what Phillips calls “the only serious philosophical question” for some of us (the fortunate or affluent). Phillips is given to exaggeration and paradox, but that’s o.k. 

Below are some of his observations on being monogamous, with occasionally flippant responses:

(39)  “If you’ve got nothing to hide, you’ve got nowhere to go. Which is one of the reasons why couples sometimes want to be totally honest with each other.”  Because they have nowhere else to go or don’t want anywhere else to go?

(62)  “It is no more possible to work at a relationship than it is to will an erection or arrange to have a dream.”  Yet doing something on purpose, like smiling, can sometimes make us happier.

(69)  “There is always someone else who would love me more, understand me better, make me feel more sexually alive. This is the best justification we have for monogamy — and infidelity.”  Since there will always be someone better, you might as well stop searching. Or not.

(75)  “From the child’s point of view, the mother is — as the father will soon be — a model of promiscuity. She has a thousand things to do. She knows other people.”  Yes, she was quite a disappointment that way!

(98)  “If we don’t choose monogamy, our fate will be isolation or the chaos of impersonality.”  Dying alone can be bad, even worse than the dying itself.

(111)  “Familiarity may increase our affection, our respect, even our time for other people, but it rarely increases our desire for them.” As the song says, how can I miss you if you won’t go away?

(115)  “One way of loving people is to acknowledge that they have desires which exclude us; that it is possible to love and desire more than one person at the same time. Everyone knows that this is true, and yet we don’t want the people we love to start believing it about themselves”.  It might be possible, but not everyone believes it is.