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Thursday, April 20, 2017

How the Rich Murder the Poor

When mobs rioted in Ferguson, MO and burned down their own neighborhoods, commentators were aghast. They wondered how anyone could engage in such self-destructive behaviour.

But, to be fair to the impoverished people of Ferguson, they were merely imitating the rich and politically powerful as best they could. A new study shows that those who work to help the poor by raising the minimum wage have, in fact, been burning down poorer neighborhoods and destroying the businesses. Instead of using gasoline and a match, they use the law, but the effect is the same.
"Local minimum wage hikes cause restaurants to leave or shut down and deter new ones from entering, according to a new Harvard Business School study of the San Francisco Bay Area restaurant industry that contradicts the orthodox liberal view that steeply raising the cost of unskilled labor will not affect jobs or hiring.
More interesting, though, are the study’s findings about which restaurants are forced to leave by the higher wage floors. The authors compared rates of departure of restaurants across different Yelp ratings, and found that the policy hit low and mid-quality restaurants much harder than top-tier restaurants. “Our point estimates suggest that a $1 increase in the minimum wage leads to an approximate 14 percent increase in the likelihood of exit for the median 3.5-star restaurant but the impact falls to zero for five-star restaurants.” 
While a restaurant’s Yelp rating doesn’t correlate directly with its price range, this differential effect suggests that it’s easier for rich people to ignore the deleterious effects of minimum wage hikes. Virtually all of the most expensive restaurants in San Francisco have four or more stars; the city’s business and professional elite are unlikely to see many of their favorite high-end destinations pushed out of the city. Poor or middle-income workers are less likely to have the luxury of only frequenting top-rated establishments, not to mention that they are more likely to work at the restaurants that the hikes put out of business.
Similarly, the tax burden on the poor is far too high. Now, you may say, "Wait a minute! You always say the bottom 50% pay essentially nothing in taxes!"

That's true. The bottom 50% do pay almost nothing in taxes. But it isn't quite nothing. Study the chart below. Even a glance shows the bottom 20% of the nation pays 0.6% of the taxes. But, when you consider how much wealth the bottom 20% own, that 0.6% is way, way more than they can afford.

The top 40% pay over 88% of the taxes. And when you consider how much of the nation's wealth that top 40% owns, they still don't pay enough of the taxes.

Notice something about the graph. Even though the top 20% pay 85% of the taxes, the percentage of taxes paid as a ratio of wealth owned flips for everyone below the top 20%. The top one percent of wage earners pay 24% of the nation's taxes, but they own 34.6% of the nation's wealth. That's not a bad deal. Similarly, the top 20% pay nearly 68% of the nation's taxes, but they own 85% of the nation's wealth - they're still doing fine.

But then it flips. Everybody below the top 20% of wage earners actually pay a larger percentage in taxes than the percentage of national wealth they have access to. The second tier pays, in percentage terms, twice as much in taxes as they have in wealth. The third quintile is slightly worse: they pay, in percentage terms, more than double in taxes as they have in wealth. The fourth quintile only pays 2.5% of the taxes, but that's about a thousand times higher than they should be paying, when their wealth portion is considered.

And for the poorest of America's poor, the bottom 20%, Lord have mercy. They may only pay 0.6% of the nation's taxes, but they own absolutely none of the nation's wealth. That is, the bottom 20%, are actually suffering under an essentially INFINITE tax burden once you consider the fact that they own zero percent of the nation's wealth. The table below shows the problem. The bottom 20% has a divide by zero error.


% Taxes Paid % National Wealth Owned Ratio of Taxes Paid to Wealth
Top 1% 24 34.6 69%
Top 20% 68.7 85.1 81%
2nd 20% 19.3 10.9 177%
3rd 20% 8.9 4 223%
4th 20% 2.5 0.2 1250%
Bottom 20% 0.6 0



"But, wait! Don't the poor get a lot of money from the government?" Well, that depends on what you mean by "a lot". They bottom 40% get between 50% and 100% of their total income from government transfers, but even so, they actually get less government money than the rich do. As I did with the graph above, the graph below is simply a visual representation of the 2011 CBO data that I presented a year ago.



The rich and powerful control the commentary, so we hear a lot about how much the rich pay. And they do pay a lot - there's no question of that. But the poor aren't making out like bandits. They're barely making by at all.

9 comments:

Olivier Glowacz said...
This comment has been removed by the author.
Olivier Glowacz said...

So this blog is just boilerplate leftism dressed up in priestly vestments?

Steve Kellmeyer said...

Name-slinging is for liberals.
If you can refute the facts presented, refute them.
If you think I mis-represent Church teaching, explain how.
If you want to understand how Catholics view poverty, read the sermons of St. John Chrysostom, Father and Doctor of the Church.
If you think I have mis-represented Chrysostom, explain how.

https://www.amazon.com/Wealth-Poverty-Saint-John-Chrysostom/dp/088141039X

Olivier Glowacz said...

If Jesus was the man you think he was he would have called for three revolts: one against the Romans, another against the Pharisees, yet another against the Rich. He called for none. Instead, he willingly offered himself up to these people as a lamb lead to the slaughter, dying for our sins on the cross.

Obsessing over the rich is easy. Making sacrifices for the poor is hard.

Which road are you taking?

Steve Kellmeyer said...

Which part of "read the sermons of St. John Chrysostom" were you having trouble understanding? Read the Fathers and Doctors of the Church on poverty.

Then, tell me which part of their teaching I got wrong, and how.

Olivier Glowacz said...

Liberalism is anathema to Catholicism. Period. I'm not interested in debating with someone who's views are obviously wrong. Do I have to read the Koran before I can say that Islam is a false religion?

Steve Kellmeyer said...

Oliver, what you mean is, you have no intention of actually learning what the Fathers and Doctors of the Church teach.

If you think St. John Chrysostom is wrong, say where he erred.

If you think the Koran is wrong, say where it erred.
I could list many passages in the Koran and the hadith which are obviously erroneous. On the other hand, there are many passages which are correct - that God is all-Merciful, all-Compassionate, that Mary is ever-virgin, that Mary and Jesus are sinless, that Jesus will be the Judge on the Last Day, etc.

Islam may be a false religion, but we must, as Catholics, distinguish its false teachings from its true teachings, so as to draw the Muslim from the partial truths they already possess towards the full truth.

You appear to claim that St. John Chrysostom and the other Fathers and Doctors of the Church are in error. I would like to know where.

But, you fear to read those sermons, so you are incompetent to make your point.

Steve Kellmeyer said...

But, to be fair to you, Oliver, you are incompetent to prove even that any of the data provided in the graphs in this essay is incorrect. All of it came from the Congressional Budget Office, and the CBO is commonly acknowledged to be about as non-partisan as anything in federal government.

You can't controvert the economics, nor can you controvert the Christian teaching that goes with it, so you're left with slinging names and refusing to engage the discussion. Which I can't blame you for. If I were as empty on facts as you, I would do exactly as you have done, for there is nothing else to say.

There are no opposing facts, there is no viable opposing philosophy.
You have empty hands, and you have to distract from that fact.
That's sad.

Joe said...

Is "wealth owned" being used synonymously with "income earned" or "assets"? Because if we're equating wealth with assets, and the tax data used by the CBO is from income tax, then I'm not sure the relation of taxes to wealth is the most accurate comparison that ought to be used here. As you know, we generally don't pay income tax on assets we own. Some clarification would be helpful.

Joe