
How America's Top 20 Percent Perpetuates Inequality - panic
http://bostonreview.net/class-inequality-education-opportunity/richard-v-reeves-dream-hoarders-how-americas-top-20-percent
======
ajuc
I never understood that about USA.

Free (or at least affordable) university education is one of the most cost-
effective investments a state can make. I've seen it work wonders in Poland in
the last 25 years. And I don't mean "education to become academic scientists"
\- that part sucks in Poland. I mean "education to become globally competitive
in high-margin areas of economy". It's cheap, it benefits economy in many
ways, and it lowers the inequality. If Poland can afford it (and could afford
it when it had GDP per capita under 10 000 USD) - USA can too.

Also - economy is not zero-sum. Yes, top 20% is always 20%, but if the
division between incomes of top 20% and top 30% is negligible - why should we
care about top 20%?

And if your country has 20% of people that can compete on global market, but
other countries have 40% or 60% - you're screwed. Well, I guess you can just
import them instead of teaching your own, but what to do with these non-
competitives you're left with?

------
flexie
The article says top 20 percent consists of the households making $112,000 or
more.

Many of those families live in places like New York or California where
$112,000 is not much.

The families I know in New York City making around $2-300,000 live paycheck to
paycheck in tiny, old rented apartments. Both parents work until 6-8 PM, they
barely see their kids except in weekends. They spent the first decade or so
after college paying off student debt and now they have five figure credit
card debt. Their life is void of luxury. No cars, no fancy vacations, no real
estate, no savings, no shares, often no pensions savings either. Everything is
spent on kindergartens, nannies, schools, rent etc.

You may be upper middle class if your family makes $112,000 in Oklahoma. But
it simply doesn't make sense to regard people in New York City or the Bay area
with such salaries as upper middle class.

~~~
rarec
Families making $200,000-300,000 lives paycheck to paycheck?

Sorry, but just what in the everliving fuck are they doing with that money?
Burning it for warmth?

~~~
harryh
FWIW here is my (rough) monthly spending for a family of 3 (husband, wife, 2yo
son) in NYC. My income is in that range, but I've always been a saver (and
I've had more than my fair share of lucky breaks) so I do not live paycheck to
paycheck.

[https://gist.github.com/harryh/970743e082bc7c9857ac9149997cc...](https://gist.github.com/harryh/970743e082bc7c9857ac9149997cceeb)

(I'm going to delete this gist later. Maybe silly but I don't feel 100%
comfortable posting this data on the internet forever).

I live a nice life and have nothing to complain about. Last year 40% of my AGI
went to taxes (fed, state, local + fica). There are plenty of good reasons to
think that number should be higher.

~~~
mcbruiser3
don't forget massive taxes for anyone in that tax bracket. so yeah, 200-300
can go VERY quickly in places like NY or SF. It's not rich at all and lumping
everyone under one scale across the entire country makes ZERO sense.

~~~
harryh
I disagree that lumping everyone in the entire country into the same tax
brackets makes zero sense. Living in NY or SF is a luxury good. Just because I
choose to partake in a luxury good doesn't mean that I should get a break on
my taxes.

------
jmaygarden
If you define a class by the top 20% of income earners, then you can never
have a "classless" society. You'll always have a mathematically top 20%.
That's an entirely different idea than say nobles versus peasants or racial
apartheid.

I liked much of what the author had to say, but claiming that America has a
more rigid class structure than a nation with a hereditary monarchy seems like
a stretch.

~~~
JSONwebtoken
Why should I not deserve to be in the top 20%? I worked hard, studied
diligently, and obtained rare and pragmatic skills so that I may live my life
to a greater degree of contentedness than 80% of people.

Why should I not I want my kids to grow up with the privileges of the top 20%?
I worked the hours of 3 standard people over my lifetime to accumulate the
wealth I want to pass onto my offspring to secure my genetic legacy. Aren't I
just fulfilling what biology deems as life's most imperative mission?

Why should I feel hated for cashing in the chips on a successful venture that
would have failed 9 out of 10 other times? Starting a business already has
negative expected value, so why is it on the 1 out of 10 times that I succeed,
40% of what I win gets taken away?

Why should I want to live my life to the same degree of effort and reward as
every else? What is the point of living life in such a manner, as governed by
some impenetrable limiter of success and reward, it would be like being stuck
for the rest of your life on tutorial island in Runescape, where you can't
burn your shrimp on the campfire and you can't die to monsters, as that is
where 100% of accounts begin their lives and where 80% of accounts never log
back in.

~~~
notacoward
> Why should I not I want my kids to grow up with the privileges of the top
> 20%?

 _You_ might deserve whatever you've worked for, but that has nothing to do
with the question of whether _your children_ deserve more or less than others.
I'll let you look up John Rawls's "veil of ignorance" thought experiment for
yourself.

> Why should I feel hated for cashing in the chips ... 40% of what I win gets
> taken away?

The system does enough to incentivize gambling already. The results are
already non-linear, and if you were truly one of those lucky ones then you're
still richer than the other nine even with 40% taken away. To the extent that
incentives for gambling and arbitrage displace incentives for more beneficial
or sustainable kinds of effort, that's bad both morally and economically.
Almost nobody's suggesting that everyone should be kept absolutely level. The
question is to what extent we should attenuate the accumulation of riches
(especially inter-generational riches) to balance out the various "rich get
richer" amplifying effects that already occur.

------
gizmo
It's not a bad article, but it makes the same observations about opportunity
we've read about a thousand times before. The article mostly describes the
status quo, but doesn't say much about the root causes or about possible
solutions. Maybe the full book is better, but I doubt it. The author doesn't
strike me as a person with deep insights.

One sentence from the article really sticks out: "The American ideal of a
classless society is, to me, a deeply attractive one. It has been
disheartening to learn that the class structure of my new homeland is, if
anything, more rigid than the one I left behind and especially so at the top."

The author, a highly educated middle aged British guy who works at a think
tank, needs years to figure out that the United States isn't the bastion of
opportunity it purports to be? Come on! Literally the moment your plane lands
at the airport you notice food is prepared by immigrants, and taxi drivers
have missing teeth. The inequality is visible everywhere, and it stares you in
the face. The author only barely recognizes the contradiction between his wish
for equal opportunity for all and his desire to give his children a leg up.

Ultimately he concludes that hoarding opportunity by the top 20% "results in a
less competitive economy as well as a less open society". In other words, he's
_still_ arguing that the top 20% should be in favor of equal opportunity out
of self interest, because it builds a better society for all. This is in
direct contradiction with his earlier observations about the zero-sum nature
of opportunity. Efforts to redistribute wealth and opportunity from the rich
to the rest does not benefit the rich: it's called class conflict for a
reason. Maybe in another decade or so the author will figure this out.

~~~
aaron-lebo
He may (or may not) be contradicting himself, but the argument isn't wrong.

By hoarding wealth, the richest prevent their own wealth from growing (out of
risk aversion and greed), and they end up either voluntarily transferring
wealth or it's taken from them by an angry underclass. You can see why (after
the fact), they would've preferred the former. Posted this yesterday but
Acemoglu and Robinson's Economic Origins of Dictatorship and Democracy goes
into this in depth.

[http://neweconomist.blogs.com/new_economist/2006/01/book_rev...](http://neweconomist.blogs.com/new_economist/2006/01/book_review_eco.html)

Besides, it's really nice to be wealthy, but wealth can't protect the
wealthiest from getting murdered by someone lacking mental healthcare or
getting radicalized because they have no other option. Thus spreading the
wealth does help everyone.

Also, you are misrepresenting what he said re Britain and the US.

 _I am British by birth, but I have lived in the United States since 2012 and
became a citizen in late 2016. There are lots of reasons I have made America
my home, but one of them is the American ideal of opportunity. I always hated
the walls created by social class distinctions in the United Kingdom. The
American ideal of a classless society is, to me, a deeply attractive one. It
has been disheartening to learn that the class structure of my new homeland
is, if anything, more rigid than the one I left behind and especially so at
the top._

The only thing he's saying is that while Britain has a society with obvious
class differences, the US has those differences hidden. It's not that it took
years for him to figure out cause he's a clueless dummy.

~~~
jacob019
While I would love to live in a more equal society, history shows time and
again that government efforts to redistribute wealth mostly destroy it. We
should try to devise systems that prevent power from centralizing in the first
place.

~~~
jamescostian
> efforts to redistribute wealth mostly destroy it

Not sure what you mean by this. Isn't the goal here to destroy a lot of
wealth? Wealth is a relative term - someone with $1B is not rich because 1B is
an inherently big number, they are rich because $1B is orders of magnitudes
greater than what most people will make in their lifetimes. Making people all
have about the same in the bank other would destroy wealth.

~~~
mac01021
While relative wealth definitely has value (mostly because it enables you to
afford the labor of others), wealth itself is not fundamentally relative.

\- Almost everyone today (in western, developed nations) has more purchasing
power than almost everyone did 100 years ago. Doesn't that mean that everyone
is more wealthy?

\- As new technology is developed, Alice's wealth depends less on Bob's
poverty, because she can rely more on automation and less on Bob's labor. This
might cause tremendous problems for Bob, but that's besides the point. Bob can
now (if he manages to prosper) become immeasurably wealthy without reducing
Alice's wealth in the least.

\- You could make millions of dollars selling farm equipment. It seems clear
that, in doing this, you are accumulating wealth. But it is not clear that
your success needs to be at anyone's expense. Presumably your customers are
buying your wares because your product helps them build wealth too. If the
market is saturated, your success might come at the expense of your
competitor's, but that seems like a different phenomenon from the idea of
relative wealth that you've described above.

------
droithomme
> the top fifth of the income distribution—broadly, households with incomes
> above the $112,000

These are not rich oligarch industrialists at all.

If your total household income, husband and wife together, is $112k, you're
middle class in most of the country. In some areas like the Bay and Manhattan,
you're lower middle class. You generally don't have access to subsidized rent
and you don't get subsidies for health care.

Making people at this level earn less so everyone will be more equal just
means more fall into poverty.

A better solution is to focus on returning skilled high pay jobs to the US in
order to get more people into higher brackets.

> Income growth has not been uniform within the top fifth, of course: a third
> of the income rise went to the top 1 percent alone. But that still left $2.7
> trillion for the 19 percent just beneath them.

2.7e12/326.e6*.19 = $1574 increase each on average. For the income range
discussed, this is just barely keeping up with the rate of inflation.

~~~
maxerickson
Have you properly accounted for households vs people in your final calculation
and comparison?

~~~
droithomme
Yes I did and that was clear in my post. Much more interesting is "a third of
the income rise went to the top 1 percent alone". Don't you think that is
relevant? These folks received vastly more earned income raise than the rate
of inflation. Should we consider unearned income as well?

------
rbcgerard
I always get a little annoyed when people talk about benefits of some tax
deduction accruing to the "rich". It's not that it's technically wrong but,
but rather a sort of a truism - if you can take the max deduction and have a
high marginal tax rate you will accrue more benefit (whether it's 529 or
mortgage interest deduction).

That being said, you also are likely to pay more taxes both nominally and
proportionally if you are benefiting from a 529 deduction - so when you take
the revenue side of the equation into account the proposition looks a lot less
lopsided...

~~~
mgkimsal
"deduction", perhaps, but what about "reductions"?

The AHCA had a provision to eliminate a 2% additional tax on dividend income
(IIRC) for people earning over $200k. Removing that is, as far as I can tell,
_only_ a benefit to "the rich" (by some definition, maybe not yours).

~~~
prostoalex
A very small segment of the rich who rely on dividend payments for cashflow
and are not financially savvy enough to hold dividend-producing stocks in a
trust or tax-shielded accounts.

Special provision for higher tax on dividend income after a certain threshold
(a) complicates the tax code (b) increases the cost of tax preparation,
therefore removing disposable income that would be spent elsewhere from those
sectors of the economy and (c) encourages companies to favor stock buybacks
over dividend payments, which introduces its own distortions into the economy.

And oh, by the way, it's completely avoidable if you suspect your income will
exceed $200k and are willing to spend 10 minutes to rebalance your taxable
accounts in favor of growth stocks, real estate and municipal bonds.

Other than that it's an excellent provision in the tax code.

------
notacoward
I'm not sure I agree with the author's policy prescriptions, but the figures
on income growth among different segments are interesting. As much as we might
be falling behind the top 1%, we 2-20% folks are still pulling away from the
rest and that has important implications. A thought-provoking read overall.

~~~
sharemywin
What I found most interesting is his point about licenses and degrees etc.
Most doctors need to start over that are licensed in other counties. Try
getting a professional license if your a felon(even a drug charge).

------
NoGravitas
The top 20% certainly do support problematic policies, and they do need to
look at how their preferred policies are harmful to most Americans.

But the real problem is still the 1% (or the 0.1%). It just hasn't caught up
with the top 20% yet. Unless the arc of US politics changes radically, and
I've seen no indication that it will, over the next 30 years, these people are
going to be proletarianized the way the rest of us have been over the last 30.
You can see it already in the decline of private medical practices as doctors
become employees of hospitals and chain clinics. In the decline of tenured
faculty at universities. The zottas are not going to tolerate that share of
_their_ wealth going to their high-skilled servants for any longer than they
have to.

------
svantana
It is only natural that the people in possession of resources are reluctant to
share them; that is also the case in most countries, in my experience. The
weird thing about the U.S. is that so many below-median-income folks are
right-wing -- the very ones that would benefit from increased wealth
distribution. I guess part of the explanation comes from the mirage that is
The American Dream. In some sense a lot of us Top 20 percenters are Dream
_Sellers_ \-- if you just buy the right shoes, food, anything, you too will be
successful and get social status. (Yes I am one of those Scandinavian
socialists)

~~~
jacquesm
> I guess part of the explanation comes from the mirage that is The American
> Dream

No, it's much simpler than that: blacks, gays, guns, abortion.

~~~
crusso
I would beg you to look for a much more nuanced understanding of the people
whom you oppose politically.

Attempting to reduce all the of the great Conservative/Libertarian arguments
for not wanting top-down tyrannical centralized high-tax government that takes
away liberty to instead being single-mindedly rooted in racism, homophobia,
etc. may make you feel better that your opponents are irrational emotionally-
driven zealots -- but you've so missed the mark on comprehending the people
who oppose you that you're only helping to further the enormous divide of
understanding that we have in politics today.

~~~
jacquesm
I would beg you to try to understand that the whole 'Conservative/Democrat'
divide as far as I can see from some distance is utterly ridiculous in the
eyes of a good chunk of the world.

If gays/guns/racism and abortion were not hot political buttons in the United
States the Republicans would likely never win an election.

Libertarians have to all practical intents and purposes no representation in
congress that is able to move the needle so can be safely ignored. It's just
the rich making themselves richer, one group going about that slightly more
nuanced than the other.

And if the libertarians would be represented in congress in numbers that could
move the needle the rich would be making themselves richer even quicker.

~~~
crusso
_utterly ridiculous in the eyes of a good chunk of the world_

I normally find that people outside of the US are not so nearly informed as
they think they are about the driving dynamics of US politics, especially when
it comes to things like "why do people vote the way they do".

For the most part, people outside of the US start with their non-American
cultural biases which makes them extraordinarily susceptible to what are also
the loudest voices: Hollywood, the news media, and the most outrageous
politicians - while being almost completely ignorant of the undercurrents that
actually drive dinner table conversations.

Although libertarians aren't very represented, if you don't see the heavy
strain of libertarianism in modern Conservatism - I'd say that's another
indicator that you don't know much about the politics of the people you're
overly simplifying.

~~~
jacquesm
> I normally find that people outside of the US are not so nearly informed as
> they think they are about the driving dynamics of US politics, especially
> when it comes to things like "why do people vote the way they do".

I'd be more than happy to bet that they are typically a lot better informed
than you'd guess and that the reverse (Americans being informed about the
dynamics of politics in other countries) would be dramatic.

Keep in mind that whatever the US does the world is affected so American
presidential and mid-term elections are followed the world over by people who
have absolutely no way to influence (well, that's the theory at least) but who
will very much be on the receiving side of whatever the outcome is.

~~~
crusso
I didn't claim that Americans understand politics in other countries that well
at all.

 _I 'd be more than happy to bet that they are typically a lot better informed
than you'd guess_

And yet every person I've talked to who has an outside-looking-in view of US
politics was positively stunned that Trump won the election. Their left-
leaning news sources and celebrities absolutely convinced them that there was
no way that America would elect Trump. Once again, they didn't understand
American politics as well as they thought they did. Rather than admitting
their ignorance, they tend to rationalize.

------
0x27081990
A and B decide what C has to pay for D, while some of that tax money happens
to fell into A and B pockets.

------
devoply
Why would you want to live your life like so many other people are forced to
live. If you are at the very top that means privilege. Those are the only
people left with privilege, everyone else works for a living and works harder
than everyone else for a better living.

------
androck51
Just on the funding level..... the top 20% pay 84% of federal income taxes
.... So, maybe they should pay 100%, and 'feel' guilt free for the income tax
category...

------
briandear
... likely to run into the solid wall of upper middle-class resistance, even
those that simply require a slightly higher tax bill...

What are the unintended consequences of this slightly higher tax bill? Does
this writer not know of the Laffer Curve? The top 20% already pay the vast
majority of income taxes in the United States And now he suggests they should
pay more? Why not instead reprioritize spending, including cuts to programs
that are proven not to work?

The "War on Poverty" has not resulted in any significant change to US poverty
rates yet money is still spent on those programs. Farm subsidies, social
security and Medicare and Medicaid fraud and abuse and the defense
department's propensity to bleed money-- there are many areas that can and
should be addressed before simply raising taxes.

And what about college cost inflation? College expenses have risen more
dramatically than health costs. Could the influx of easy public money and
loans have something to do with it? Look at the cartel's controlling textbooks
and scientific journals! We lose our collective minds over Uber surge pricing
but say nothing about $200 textbooks that were often written by professors
working for public institutions. In universities you have countless Provosts
and vice Provosts who pretty much add no value. You have administrators who
simply administer other administrators. It's a racket of which the mafia could
be proud. Adjunct professors barely scrape by while the "Director of
Residental Student Diverisity Affairs" makes six figures. Many on the left
like to complain about CEO pay yet let academia have a free pass to hand out
titles and six figure non-teaching jobs out like candy -- all on the backs of
students and indirectly, the taxpayer. If we want to expand educational access
then the universities ought to start with themselves: cut the waste, lower the
price. But they won't do that; the "liberals" in charge of universities
actually perpetuate the educational inequality they purport to oppose. It
certainly isn't conservatives in the Ivy League that maintain legacy based
admissions or $80,000 per year price tags.

The problem isn't that taxes are too low, it's that government does a bad job
when it comes to budgeting and fiscal policy.

I am not opposed to "left wing" proposals as much as I am opposed to "raising
taxes and redistributing wealth" as the only means presented as the way to
accomplish those proposals.

Zero-based budgeting would be a good start. Then every year the government can
better allocate money rather than just continually adding to whatever the
previous year's expenditures happen to have been.

~~~
maxerickson
The Laffer curve is a fantastic rhetorical device.

Where's your data showing what the slope of it is for the current US tax
regime? Oh, you don't have one? Why not? Afraid it might undermine the
rhetoric?

The fraud in Social Security and Medicare and Medicaid isn't that high. If you
want to bitch about those programs, bitch that they don't pay market rates for
the services they mandate, hiding a tax in the payments other people make for
medical services.

------
pdog
I think the top 50 percent are really responsible for income and wealth
inequality. Why should they have more than the bottom half?

------
tomjen3
and once again he defines the problem so that it has to be a zero sum issue.

------
DarkKomunalec
"Race played a significant role here, with whites reacting (almost entirely
incorrectly) to a sense that Americans of color were overtaking them."

I suppose that 'almost' is there to exclude population numbers, what with
whites projected to become a minority by 2050 (in the US - the white
population is pretty small on a global scale, at ~8%).

~~~
oblio
To Europeans the whole US "white" thing is ludicrous. Americans count
Hispanics as non-White, and while a good percentage of them are probably
mixed, a big group are definitely what we'd call "white". You guys would go to
Spain and Italy and call locals "Hispanics", based on your definition, while
no German (for example) would ever do that.

~~~
lotsofpulp
I think it's a class/culture thing, not a skin color thing. Hispanic implies
you speak Spanish at home, likely to be an immigrant, maybe 1st or 2nd
generation to be born in America, and your food/holiday/overall culture is
different from the old "white" American one depicted in old TV shows and
movies.

------
havella
For households without kids it wouldn't be egregious to have the ability to
make 529 size contributions to Roth-IRA.

~~~
bluedevil2k
"529 type contributions to Roth-IRA" \-- They do, it's called a Roth IRA

~~~
havella
mmm perhaps lack of clarity on my comment. I was referring to the size of the
maximum contribution. $14000 for 529 vs 5500 for ROTH and there's an income
limit for ROTH. ~190k

~~~
smileysteve
For that, we have the Roth 401k. Certainly 401ks aren't limited to the 20%,
but the 20% can certainly contribute more easily and get more nominal
matching.

------
IanDrake
"First they came for the Socialists, and I did not speak out— Because I was
not a Socialist.

...

Then they came for me—and there was no one left to speak for me."

Now replace the socialist, trade unionist, and Jews from this famous quote and
insert your income percentile to see what's going on here.

I said this during the occupy movement. It's not the 1%, not the 2%, not the
10%, not even the 20% that need to be worried. For they will not satisfy those
who have not achieved what they desire.

What people who promote class warfare desire is financial results without work
or risk because that's how they perceive those with money attained it.

Expect to see articles about the top 25% and 30% next.

~~~
KozmoNau7
"What people who promote class warfare desire is financial results without
work or risk because that's how they perceive those with money attained it."

Which also happens to be the truth.

Sure, hard work and risk were involved, but generally not on the part of the
people who ended up with the money.

~~~
Para2016
As another commenter pointed out, to be in the top 20% a household only needs
to earn $112k a year. That's like 2 teachers getting married, or 2 nurses, or
2 mid level office workers/government workers.

And this college fund implies there are kids involved. So a household with
$112k/year and kids should be taxed heavily as possible because they didn't
earn it? If they live in a high cost area or have any debt/medical problems
they'll be in even more trouble.

It sounds to me like you want to tax and burden families such as that to move
them back down into the income strata where there is uncertainty for
housing/medicine/food/education/transportation. Why don't you like the idea of
people working and earning an income in order to remove those uncertainties?
That's all I want to do with my life. Is that such a terrible desire that when
I finally get there I should have it taken away? By the way, I'm a recent
medical graduate with 250k in debt from a lower-middle class family. If all
goes well I'll be one of those evil 20% people after residency.

~~~
KozmoNau7
No, I simply want there to be progressive taxation with a relatively high
marginal tax rate, and for people to actually pay the taxes they owe, instead
of hiding them in tax shelters.

My income is comfortably in the region where I have to pay the marginal tax
rate in my country (56%), and I pay it happily because I know it pays for
valuable services and welfare for everyone.

