Re: The super-rich get less from rent, more from labor

On Sat, 09 Sep 2006 23:00:58 -0400, S. Doo <none@xxxxxxxxxxxx> wrote:

Greg Mankiw...

http://gregmankiw.blogspot.com/2006/09/who-are-richest-rich.html

Mankiw is not exactly astute when it comes to thinking about how very
large unearned incomes are obtained, as is easily proved:

.... The top 0.01 percent of the income distribution, those now making
more than $5 million a year, have increased their take of the income
distribution (before taxes) from 0.86 percent in 1980 to 3.19 percent
in 2004, the most recent year available. (It peaked in 2000 at 3.44
percent.)...

Putting aside for a moment the typical overwrought discussion of
policy and politics,

IOW, studiously ignoring the actual explanation for the phenomenon in
question....

the positive question of why the richest rich
have done so well is fascinating as a matter of economics.

Here is the question I would like answered: Who is this group? They
make up about 14,000 taxpayers. Some of them are CEOs, but the Fortune
500 has only about 500 of them. The group includes some athletes,
actors, media personalities, hedge fund managers, and trial lawyers.
Some of the richest rich start and run their own businesses. Some are
authors (but, sadly, none is a textbook author)...

One thing we do know is that, according to Saez and Piketty, there has
been "a sharp change in the composition of top incomes away from
capital income and toward labor income." The percent of this elite
group's income that comes in the form of dividends, interest, and rent
has fallen from 56 percent in 1980 to 25 percent in 2004.

Notice that ***__CAPITAL GAINS__*** are not included in this
definition of "capital income," and as a consequence, it becomes
possible for Mankiw to pretend that:

Increasingly, the top income group is not the idle rich but the
working rich...

Gee, do you suppose that the LOWER INCOME TAX RATE on capital gains
compared to dividend, interest and rent income might have something to
do with this?

Can someone explain to me how this sort of "analysis" differs from
good old-fashioned lying?

Self-evidently, the massively excessive quantitites of income being
appropriated by the top 1% of the top 1% are not earned by any sort of
productive effort. They are obtained by pocketing public created
rents on land, natural resources (like oil, hello), intellectual
properties (the entertainers, movie and software moguls, etc.) and
perhaps most importantly, irresponsible power to appropriate corporate
assets through bogus "executive compensation" schemes. A contributor
to Mankiw's blog sets the record straight, for those willing to know
the truth:

"I really do think that the executive compensation levels are extreme.
Having worked with people in these levels, I found that the vast
majority of them were not as smart, not as creative and not as hard
working as many of the people at the levels below them. What they did
do well was to network with people who had some influence over their
advancement.

"As far as stock options, the gross numbers really don't tell the
whole story. When I received stock options form a Fortune 10 company,
the options were vested in 1 year and had a life of 10 years so the
chances of collecting were pretty good. If the stock price didn't
significantly apreciate in the short term, it wasn't unusual for us to
receive a dividend check on the number of shares which we had options
on as if we actually owned the shares. It also wasn't unusual for the
annual option award date to be changed based on the price of the stock
in the stock market so as to maximize the potential of the option
award.

"It was also clear to me that decisions were being made that were not
in the long term net interest of the company or the share price in
order to maximize the near term gain."

-- Roy L
.

Relevant Pages

  • Average American Family Income Declines
    ... Average American Family Income Declines ... By MARTIN CRUTSINGER, AP Economics Writer ... After the booming 1990s when incomes and stock prices were soaring, ... Net worth, the difference between assets and liabilities such as loans, ...
    (soc.retirement)
  • Re: issuing stock options to a foreign contractor
    ... Yes, it is legal, as a general matter, for a company to offer stock ... subject to special treatment under the income tax treaty between the US ... will be treated as compensation income. ...
    (misc.taxes)
  • Re: OT: So after the Democrats clean house tomorrow.
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    (comp.sys.mac.advocacy)
  • Re: Obamas Czars
    ... Many of the gov't workers I hang with have multiple jobs/get multiple checks/consulting fees, even 0bama filed an income tax form while he was still a senator, showing 8 million bucks of income, think they pay senators 8 mill a year? ... The Illinois senator’s 2008 financial disclosure statement shows he sold mutual-fund shares worth $42,696 on Sept. 19, the day after then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke urged congressional leaders in a closed meeting to craft legislation to help financially troubled banks. ... The same day, he bought $43,562 worth of Berkshire Hathaway’s Class B stock, the disclosure shows. ... By Oct. 2, he had invested $98,046 in Omaha, Neb.-based Berkshire Hathaway, the form shows. ...
    (rec.outdoors.rv-travel)
  • Re: An Army Of John Galts?
    ... income simply rolled into your gross income. ... Assuming a Google-like IPO, not the usual kind which are simply ... the nominal IPO price. ... mean buying a company's stock, and holding it and getting dividends. ...
    (rec.arts.sf.fandom)