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[rkbabang]

There is a lot of talk in this thread about $100K+ salaries, even some who think teachers should make more than that.  I realize that many people here make more than that and don't think of themselves as rich, but if you look at the reality of the situation only 7% of wage earners in the US make $100K+/year.  If you make that much, then you are in the 93 percentile or higher. My father was a heavy equipment operator and worked his butt off for 40+ years and never made even close to $100K in a year (he just retired this year).  He never got his summers off either.  I think he'd have a legitimate objection to make if the 3rd grade teacher in town getting paid with his property taxes sitting behind a desk indoors for 6 hours/day, getting her summers off, as well as xmas break, Feb vacation, April vacation, etc, made $100K/yr.

 

In fact the majority of people in the US earn less than $50K/yr.

 

http://upload.wikimedia.org/wikipedia/en/8/8f/Personal_Household_Income_U.png

 

Just trying to put things in perspective.

 

[CorpRaider]

I take your point, but the six hour statement is a joke.  The teachers I know have to take stuff home all the time (like more often than not: either planning or grading papers or doing some committee bs) and stay after hours for professional development and meetings internally and with parents.  My wife used to teach and during the school year she was working as many hours as I was as a new attorney at a big law firm (which is a lot, BTW) and I was making at least 3x as much.  They also have about 18 moronic administrators who all have various and detailed opinions about how they should do their jobs based upon their two years of experience in the classroom from 20 years ago. 

 

I finally talked her into going to wait tables at Chills or run the register at Target for better hourly pay and lower stress.  I'm kidding, somewhat.  They do have benefits that aren't totally crappy, but if healthcare and employment decouple, I could envision a real dearth of teachers.  In the end its about supply and demand and since women were forced into the profession for so long the labor rate in teaching is probably artificially depressed.  One would expect that to correct itself over time.

 

 

[JSArbitrage]

It looks like you can only deduct up to $2,500 of student loan interest:

 

http://www.irs.gov/taxtopics/tc456.html

 

The interesting thing is that it's kind of like a business.  You borrow money to purchase your education, and your true "profit" is the spread between your income and the cost of buying that income (your education).

 

Therefore there should really be no limit to how much student loan interest you can deduct.  After all, you aren't really making any money for yourself on every dollar you pay in student loan interest. 

 

Your "net profit" is your income less your student loan interest.

 

It's a bit like if the government put a limit on how much bond interest expense a corporation could deduct.  What if SHLD wasn't allowed to deduct it's interest expense from it's revenues?  It would be taxed on revenue, not income.  That wouldn't be fair either.

 

Actually, you can't deduct a dime of student loan expense if you make above a certain amount (I think it's like $76,000/year.)  I knew some of my business school classmates that paid off their student loans with HELOCs so they could get the deduction at their income level.

[RichardGibbons]

My father was a heavy equipment operator and worked his butt off for 40+ years and never made even close to $100K in a year (he just retired this year).  He never got his summers off either.

 

He should make significantly less than the average teacher.  There's almost no leverage in the job, compared to teachers, since teachers can potentially have a huge influence on people when they are at their most impressionable and fastest-learning stage of life.

 

That said, $100K is very low for people operating heavy equipment who actually care about making money.  I know people who started that way, and through hard work/brains/luck had net worth in the 8 figure range within a decade.  (That said, if he didn't want to make the sacrifices to do so, I understand that, and it was probably a good decision for him.  Money is not even close to the most important thing in life.)

 

All that said, I do still think $100K is a good salary.  My only real area of disagreement is that I think there's more value to be had in incentivizing someone who has a huge influence on long-term life outcomes of hundreds of people than someone who uses a machine to move stuff around.

[ERICOPOLY]

It looks like you can only deduct up to $2,500 of student loan interest:

 

http://www.irs.gov/taxtopics/tc456.html

 

The interesting thing is that it's kind of like a business.  You borrow money to purchase your education, and your true "profit" is the spread between your income and the cost of buying that income (your education).

 

Therefore there should really be no limit to how much student loan interest you can deduct.  After all, you aren't really making any money for yourself on every dollar you pay in student loan interest. 

 

Your "net profit" is your income less your student loan interest.

 

It's a bit like if the government put a limit on how much bond interest expense a corporation could deduct.  What if SHLD wasn't allowed to deduct it's interest expense from it's revenues?  It would be taxed on revenue, not income.  That wouldn't be fair either.

 

Actually, you can't deduct a dime of student loan expense if you make above a certain amount (I think it's like $76,000/year.)  I knew some of my business school classmates that paid off their student loans with HELOCs so they could get the deduction at their income level.

 

 

So let's say they raise the tax rate back to 70%.

 

The government is going to keep 70% of a person's revenue and expect them to repay their loans and interest with the remaining 30%?

 

Imagine if they were to modify corporate tax law by eliminating the ability to depreciate capital investments.  Further, image if they were to eliminate the deduction of interest used to finance capital investments.  Your company would be taxed on revenue, not net income!

 

That's exactly what the government is doing to these people with large student loans -- the government is taxing revenue, not net income.

 

As for the people who paid cash for their educations -- same thing applies.  You might be getting taxed on income yet be unprofitable overall if you consider the amount paid for the education.

 

Tax rates in this country are likely a lot larger than they look compared to certain European countries where the university education is practically free.

[rkbabang]

  They also have about 18 moronic administrators who all have various and detailed opinions about how they should do their jobs based upon their two years of experience in the classroom from 20 years ago. 

 

That is another big problem with the government schools.  The rate of growth for administrators (whatever the hell they all do) has been much much higher than the rate of growth for new teaching jobs.  It won't be long before we have more administrators than teachers in the schools. You'd think with all the new technology administration of the schools would require less people now than it did 50 years ago, not three or four times more people, but that is just what you get when government runs things.

[CorpRaider]

Yeah and almost every one of them is drawing at least two classroom instructor salaries.

[jay21]

May or may not directly relate to income inequality, but I thought this was interesting: http://www.bbc.com/news/education-26373725

 

"Many parents paying more for childcare than average mortgage"

 

"The trust says childcare in England, Wales and Scotland is becoming increasingly unaffordable with a 27% rise in costs since 2009, while wages have remained static."

[SouthernYankee]

Good morning,

 

In the past, I have gotten involved too much with issues which tend to be more of a political nature, as opposed to business/investing/financial matters. One of the things I alsways notice about these threads is that they are not as focused as the threads on a certain stock, or method of evaluating companies, or in general, making money.

 

In all of the responses, I am still trying to figure out what the definition of "income equality" is. It is the same way with the term "fairness". It seems to me, from the responses, that the definitions of these terms (I am sure there are others as well) are exclusive to each individual, or groups of individuals, instead of universally agreed upon.

 

How can a problem ever be solved, if the problem has not been defined?

 

Note: I fall more into the category which believes "income equality" & "fairness" are newer names (and/or reasons) for income re-distribution by a coercive government.

[SouthernYankee]

To put it in a different way, Buffett's and Munger's income has grown faster than mine because I chose to sell DOW, GE, PFE, KFT, WFC when they were at their highs, but that was 2 YEARS AGO or so!!!!  :'( They are all worth more today!

 

My income would have been much higher if I had bought and held, instead of cashing in when I did.

 

(I will note that most of the money went to needed improvements in properties owned by my wife and I, but in hindsight, yes the 20/20 type of hindsight, I could have taken a different approach and had the same work done, while holding on to a lot of those businesses.)

 

OUCH! Live and Learn the hard way.

 

 

[rkbabang]

Good morning,

 

In the past, I have gotten involved too much with issues which tend to be more of a political nature, as opposed to business/investing/financial matters. One of the things I alsways notice about these threads is that they are not as focused as the threads on a certain stock, or method of evaluating companies, or in general, making money.

 

In all of the responses, I am still trying to figure out what the definition of "income equality" is. It is the same way with the term "fairness". It seems to me, from the responses, that the definitions of these terms (I am sure there are others as well) are exclusive to each individual, or groups of individuals, instead of universally agreed upon.

 

How can a problem ever be solved, if the problem has not been defined?

 

Note: I fall more into the category which believes "income equality" & "fairness" are newer names (and/or reasons) for income re-distribution by a coercive government.

 

I don't think it is a matter of defining terms. The word "equality" has a well established meaning.  If there was "income equality" everyone on Earth would be forced to make the exact same income right down to the penny.  No one seems to want that, so no one is really for "income equality" what they want is to take from the people who have more than them.  Whenever I hear "income equality" or "fairness" I know that I'm either dealing with someone consumed by envy over what others have, or guilt over what they have obtained.  The envy I understand, we all have this to one degree or another, but the guilt part I do not.  If you are really guilty you can simply give what you have away.  Not only is this moral, but commendable. But you do not need to use the violence of the state to take money from others as well, this is neither moral nor commendable.

 

[tiddman]

I know people who started that way, and through hard work/brains/luck had net worth in the 8 figure range within a decade.

 

I would love to know how to do this -- earn a total of $1 million over 10 years and then have a net worth of $10 million.  Does this involve playing Powerball?  :)

[Morgan]

I know people who started that way, and through hard work/brains/luck had net worth in the 8 figure range within a decade.

 

I would love to know how to do this -- earn a total of $1 million over 10 years and then have a net worth of $10 million.  Does this involve playing Powerball?  :)

 

One way is to own real estate in a nicely appreciating market. 100k/yr FCFs from the rents, and say $1m-$2m in property that is appreciating. Powerball could work too though.  :)

[rkbabang]

I know people who started that way, and through hard work/brains/luck had net worth in the 8 figure range within a decade.

 

I would love to know how to do this -- earn a total of $1 million over 10 years and then have a net worth of $10 million.  Does this involve playing Powerball?  :)

 

No this is easy, they earned all of the $1M in cash and paid no taxes.  They lived in their parents' basement and thus had no bills or expenses not even food as Mommy cooked dinner every night, so they were able to invest 100% of that money.  And they earned excellent returns.  Let's see $1M over 10 years is $8333.33/month to invest.  In order to have $10M at the end they only have to earn an average of 37% per year for the 10 year period.  No problem anyone can do all of those things.

 

[RichardGibbons]

But you do not need to use the violence of the state to take money from others as well, this is neither moral nor commendable.

 

It's both moral and commendable.  Reducing the variance of the genetic lottery and other forms of luck is good for pretty well everyone in society, including the people who benefited from that luck. That said, I can understand why people are greedy about it.  I'm pretty greedy about it myself.

[rkbabang]

But you do not need to use the violence of the state to take money from others as well, this is neither moral nor commendable.

 

It's both moral and commendable.  Reducing the variance of the genetic lottery and other forms of luck is good for pretty well everyone in society, including the people who benefited from that luck. That said, I can understand why people are greedy about it.  I'm pretty greedy about it myself.

 

No violence is never moral.  How do you decide who gets what and just how equal to make things.  If we made everyone on the planet equal you wouldn't like the results very much as you are probably in the top 1 or 2% globally. I don't think you'd enjoy working as hard as you do now and living on $5-10K/year.  The other problem isn't how to decide, but who decides.  These things always work out where the "party" which "serves" the "people" lives well and the "people" who the "party" serves starve.  So please don't talk to me about "income equality" that's just a load of crap. If violence could solve these problems they would have been solved a long time ago, because that is the only thing that has been tried.

 

[APG12]

Reducing the variance of the genetic lottery and other forms of luck is good for pretty well everyone in society, including the people who benefited from that luck.

 

Could you expand on this more? Buffett also refers to the 'genetic lottery' quite often. Maybe you're familiar with his spiel on being born a white man, in America, in the 20th century, under capitalism, etc. I think that this idea was most recently espoused by John Rawls, although I'm not too sure about that. There seems to me to be some very serious flaws in this line of reasoning.

 

For one, we aren't a bunch of consciousnesses floating around somewhere waiting to be plucked out and put into a body. Does probability as a concept even apply to the metaphysically given?

[turar]

No violence is never moral.  How do you decide who gets what and just how equal to make things.  If we made everyone on the planet equal you wouldn't like the results very much as you are probably in the top 1 or 2% globally. I don't think you'd enjoy working as hard as you do now and living on $5-10K/year.  The other problem isn't how to decide, but who decides.  These things always work out where the "party" which "serves" the "people" lives well and the "people" who the "party" serves starve.  So please don't talk to me about "income equality" that's just a load of crap. If violence could solve these problems they would have been solved a long time ago, because that is the only thing that has been tried.

 

I think too much inequality is destabilizing for a society as a whole. That's when you get into high crime and actual violence and riots, where the 1% lose their lives, not just a portion of their wealth. And on the other side, redistribution is a feature of a civilized society, where orphans and elderly and disabled don't have to beg on the streets and die quietly in the alleys. Like many things, neither extreme works well here, but a "golden middle" is also difficult to figure out.

[Guest deepValue]

No violence is never moral.  How do you decide who gets what and just how equal to make things.  If we made everyone on the planet equal you wouldn't like the results very much as you are probably in the top 1 or 2% globally. I don't think you'd enjoy working as hard as you do now and living on $5-10K/year.  The other problem isn't how to decide, but who decides.  These things always work out where the "party" which "serves" the "people" lives well and the "people" who the "party" serves starve.  So please don't talk to me about "income equality" that's just a load of crap. If violence could solve these problems they would have been solved a long time ago, because that is the only thing that has been tried.

 

I think too much inequality is destabilizing for a society as a whole. That's when you get into high crime and actual violence and riots, where the 1% lose their lives, not just a portion of their wealth. And on the other side, redistribution is a feature of a civilized society, where orphans and elderly and disabled don't have to beg on the streets and die quietly in the alleys. Like many things, neither extreme works well here, but a "golden middle" is also difficult to figure out.

 

If there weren't so many trashy celebrities and nouveau riches running around like they just won the lottery then nobody would know there was such a wide divide. Hike income/capital gains taxes and outlaw reality television and the problem is solved.

[turar]

If there weren't so many trashy celebrities and nouveau riches running around like they just won the lottery then nobody would know there was such a wide divide. Hike income/capital gains taxes and outlaw reality television and the problem is solved.

 

Well, I don't think they had reality TV back when Bolsheviks got their hands on Romanov family and shot them all.

[Guest deepValue]

If there weren't so many trashy celebrities and nouveau riches running around like they just won the lottery then nobody would know there was such a wide divide. Hike income/capital gains taxes and outlaw reality television and the problem is solved.

 

Well, I don't think they had reality TV back when Bolsheviks got their hands on Romanov family and shot them all.

 

The Bolsheviks didn't have free internet porn, twerking, or medicaid scooters.

[DTEJD1997]

Hey all:

 

I don't think that income inequality is quite such a problem...

 

A big problem is people not being able to get ahead/better themselves in society.

 

This has been brought about in part due to the break down in the education system.

 

A lot of younger folks are getting out of school with bleak employment prospects and mountains of debt.

 

For a good example of this, see the thread I started called "For Love or Money".

 

It is the mountain of debt that is a game changer.

 

I think most people don't have any problem with somebody being well off, or even very rich.  It is when they can't live a life even remotely similar to what they had envisioned for themselves through education and hard work.

 

Combine that with a feeling that they were cheated or taken advantage of, and that creates a real possibility for change!

[RichardGibbons]

No violence is never moral.

 

Wow, I've never met anyone who thought it was immoral to fight if they or their kids were being raped or tortured. Fascinating perspective, but I think you're going to have a hard time making a lot of people believe it.

 

How do you decide who gets what and just how equal to make things.  If we made everyone on the planet equal you wouldn't like the results very much as you are probably in the top 1 or 2% globally. I don't think you'd enjoy working as hard as you do now and living on $5-10K/year.  The other problem isn't how to decide, but who decides.  These things always work out where the "party" which "serves" the "people" lives well and the "people" who the "party" serves starve.  So please don't talk to me about "income equality" that's just a load of crap. If violence could solve these problems they would have been solved a long time ago, because that is the only thing that has been tried.

[\quote]

 

You decide it the same way you decide everything else in a democracy.  People lay out their case and the people decide.  In general, people will likely vote for economic mobility.

 

It's also interesting that your perspective on USA, Canada and Western Europe is that the people who the party doesn't serve are starving.  I don't see many people in these countries starving at all.

 

Also, my belief about the $5-10K/year thing is that we aren't living a zero-sum game.  A society with solid income mobility greatly increases the size of the pie.

[RichardGibbons]

Could you expand on this more? Buffett also refers to the 'genetic lottery' quite often. Maybe you're familiar with his spiel on being born a white man, in America, in the 20th century, under capitalism, etc. I think that this idea was most recently espoused by John Rawls, although I'm not too sure about that. There seems to me to be some very serious flaws in this line of reasoning.

 

For one, we aren't a bunch of consciousnesses floating around somewhere waiting to be plucked out and put into a body. Does probability as a concept even apply to the metaphysically given?

 

I think the concept generally makes sense both before and after birth.  I don't think argument is metaphysical argument, but rather just trying to create a basis for deciding what's a "good structure of society" and what's a "bad structure for society". 

 

For instance, one could organize society so that I own everything, and all you suckers only get what I give you.  Is that a good society?  I think most people other than rkbabang would argue it isn't (though it would be important to him that nobody could take my wealth from me).  But what's your criteria for saying it's bad?  The answer this reasoning provides is that it's bad because the odds are very high that life would suck for you if you were someone born in that society.  So, that's why the argument "what society would you be in if you were randomly born into it" is necessary. 

 

(That said, if you think the "randomly born into some baby" criterion sucks, it would be interesting knowing what criterion you think is better.  That's a really interesting conversation, I think.)

 

The other thing worth noting, while people love to believe that wealth is derived largely from people working hard and making good decisions, a huge part of it is luck, even beyond whether or not you were born a white male in the USA.  Did your parents go to university?  Did IBM come to you to buy an OS because DEC was too busy to talk to them?  Did you happen to meet a person who ended up funding your business?  Were your parents rich enough to pay for your university so that you could start a business on the side while in school instead of working?  Did a celebrity happen to see your website and tweet about it?  Was Oprah in a good mood when she read your book, so decided to put it in her club?  Did you happen to be in the tech sector at the same time as a tech bubble formed?  Do your brother get cancer exhausting your family's savings?

 

Basically, there's huge variances in outcomes, and it's quite reasonable for society to decide to smooth out those variances.  The "how would you structure society if you knew you were to be randomly born into that society" is just a way of judging whether it's worthwhile smoothing out a variance or not.  I think a huge part of it comes down not to comparing levels of wealth or trying to make everyone equal, but rather economic mobility.

 

 

[APG12]

I think the concept generally makes sense both before and after birth.  I don't think argument is metaphysical argument, but rather just trying to create a basis for deciding what's a "good structure of society" and what's a "bad structure for society".

 

Hmmm, I was thinking more about this last night and now I'm pretty convinced that the genetic lottery argument doesn't make sense. The idea of 'luck' and 'probability' arise from the fact that there are contingent events in reality. So, for example it doesn't make sense to say, 'how unlucky it is that gravity exists' or to contemplate the probability that pine trees are green. These are simply facts of reality. They don't belong to the same category as a coin flip. That's what I meant by "metaphysically given". Probability doesn't pertain to them because they are just inherent to reality. Similarly, the body and time you're 'born into' is metaphysically given. A person (the consciousness and body) is the result of two specific parents. If you're white, there's no such thing as a probability of you being born black. There was no probability that Buffett was born in prehistoric times. He comes from Howard and Leila Buffett and they lived in the 20th century. He was necessarily a product of them.

 

Does that make sense? Anyways, it doesn't say anything about luck after birth or how we should treat people in different circumstances.