This one paragraph from an article in the New York Daily News by Michael Hendrix neatly summarizes a problem I have been pointing out for some time not just for New York but for Chicago and other major cities:
The city’s budget is overwhelmingly dependent on the 5% of New York’s wealthiest who left the city starting this March, and the danger is that many will stay away. Their incomes account for the great majority of the city’s income tax revenue, their shopping stabilizes its sales taxes, and their housing in well-to-do parts of the city help pay its property taxes. The typical high-earning New Yorker pays as much in income tax as 196 median-earning New Yorkers combined.
Combine lower than expected income tax revenues, lower occupancy rates both for apartment and commercial space, and lower sales tax revenue and it’s a bit hard to see how the cities will pay their bills. New York is in a far better position to secure a federal bailout than Chicago is. After all it’s gotten a federal bailout about once a generation since the end of World War II. New Yorkers have become accustomed to it. Not so Chicago.
The point here is that there is a risk associated with becoming overly dependent for tax revenue on the wealthiest tax payers. They are also the most portable.
Price the rich should be willing to pay for separation from the poor. If they find a better deal elsewhere it’s because elsewhere has a middle class to tax. Cities die, R.I.P.
The part you forget is that the wealthy have most of the money. So they get to have the money and also have the means to avoid paying taxes if they want. I dont see a way around this.
Soaking the rich is always the fallback panacea for funding the Dems utopian, Marxist dreams. Unfortunately, “rich†is an ever changing class of people. It starts with the very rich who have the legal mechanisms to hide their wealth. Then it passes on down to those who are moderately well off, until it finally reaches the middle class, who it milks for all it’s worth. After all, money is money. Those wanting and needing it don’t care where or who it comes from
That is incorrect. The top 1% of income earners earn 20% of total income. The top 10% earn just under 50% of total income.
If you’re talking about wealth, the top 1% hold 29%, the top 10% hold 70%. Much of that is almost certainly due to the financialization of the economy, something I have opposed for decades. The top 10% are not usually referred to as “the rich”. Note that the top 10% doesn’t just include Guarneri; it includes you, me, and and many of the other regular commenters here who, reasonably, do not consider themselves rich.
Here in Chicago the median teacher earns around $90,000 a year, the median police officer or firefighter around $100,000 (including overtime). Those are multiples of what the median income earner here earns and most of the city’s spending is payrolls (although pensions are a close second). One of three things needs to happen. Either we need to reverse the financialization of the economy and start creating more jobs that pay better which requires fixing our lousy trade and immigration policies, we need to figure out a way of holding the rich in place so they can be taxed, or we need to regulate public employees’ pay to the ability to pay of the communities they seve.
A few thoughts:
“Unfortunately, “rich†is an ever changing class of people.”
Absolutely correct. The literature is quite robust on the rotation of people among wealth strata. The true generational wealth dynasties are very few. And, interestingly, know no political party. Can you say Kennedy, Heinz, etc? And how does this tiny minority of people accomplish that? Steve’s precious government, of course.
These are key statements:
“If you’re talking about wealth, the top 1% hold 29%, the top 10% hold 70%.”
You could go further, and give the stat for the top .1% Talk about wealth concentration. But that wealth concentration has always been so. From the time of JP Morgan, Vanderbilt, Carnegie or Ford etc capital and innovation have created wealth. Today its Gates, Zuckerberg, Bezos etc. You are pissing in the wind if you think you are going to change that, and if it does get changed, welcome to Eastern Bloc countries. Further, does anyone think Russia, China or Venezuela et al don’t have wealth concentration? These anarchists are just plain stupid.
“All of that is almost entirely due to the financialization of the economy, something I have opposed for decades.”
As you know, I disagree with that. The generous salaries of a bunch of bond traders, investment bankers, tax accountants or corporate lawyers is not our problem. They are just naturally gravitating to where the money is. But why is the money there? Its a byproduct of a globalized world for sure. But the tax and regulatory barriers that stand in the way of operational value creators is the big issue. And of course these barriers (and globalization) are foisted upon us by a growing and more intrusive government, and disproportionately championed by Democrats. That’s the way they can extract protection money and win votes. Its a good gig if you can get it, and have no moral compass.
“The top 10% are not usually referred to as “the richâ€. Note that the top 10% doesn’t just include Guarneri; it includes you, me, and many of the other regular commenters here who, reasonably, do not consider themselves rich.”
And Guarneri doesn’t consider himself rich. Very well off, yes. Rich, no. I know what rich is. Business owners I know like the back of my hand. They have been everything from Philadelphia street kids to Iranian immigrant engineers to good old boy metal bending operators. They created something, we make them rich when we buy them and try to take their businesses to the next level. We need more of this.
But Dave (and Jan) makes the important point. “Rich” gets defined downward. Because it has to; its a fraud on the top 25%. Everyone is surely aware of the studies showing you could confiscate the incomes or wealth of the very rich tomorrow, but only run the government for days or weeks. Its the worst kind of sophistry. Further, they won’t tolerate it and you’ve just destroyed the incentive structure. You will be net tax negative, and the bottom 40% will wonder why they are unemployed. Remember the yacht tax?
It’s that but it’s not just that. It’s more and more non-banks being in the banking business, it’s companies’ buying bonds and stocks and other financial instruments rather than investing in their own core businesses.
IMO there’s evidence that financialization is inherent in consolidation. I think the problem is too many very big companies, many of which have grown through abusing monopoly power.
“The tilt to the top was most acute in the period from 1998 to 2007. In that period, the median net worth of the richest 5% of U.S. families increased from $2.5 million to $4.6 million, a gain of 88%.”
https://www.pewsocialtrends.org/2020/01/09/trends-in-income-and-wealth-inequality/
Seems pretty rich to me. You can be pedantic if you wish, but our wealth really is highly concentrated, much more than it was 30-40 years ago. If our wealth is going to be so concentrated I dont know how you avoid becoming dependent upon the wealthy, and as you note they can take their money and run whenever they arent pleased with how they are treated.
Steve
If you’ll extend the timeframe a bit to 50 years (1970), I’d agree with it. Wealth is highly concentrated in the top 10% of income earners (in the form of houses, IRAs, and other savings) but it’s a stretch to refer to that group as “the rich”.
Furthermore, I’ve suggested antidotes to the worst aspects of that: definancialization and a renewed commitment to primary production and manufacturing. What’s your remedy?