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2/3 of Americans are living paycheck to paycheck- this is not sustainable

BobStackFan4Life

BobStackFan4Life

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So says Robert Reich.
Wealth inequality is even more of a problem than income inequality. That’s because you have to have enough savings from income to begin to accumulate wealth – buying a house or investing in stocks and bonds, or saving up to send a child to college.

But many Americans have almost no savings, so they have barely any wealth. Two-thirds live paycheck to paycheck. Once you have wealth, it generates its own income as the value of that wealth increases over time, generating dividends and interest, and then even more when those assets are sold.

This is why wealth inequality is compounding faster than income inequality. The richest top 1% own 40% of the nation’s wealth. The bottom 80% own just 7%.

Wealth is also transferred from generation to generation, not only in direct transfers, but also in access to the best schools and universities. Young people who get college degrees are overwhelmingly from wealthier families.

Which is why kids from low-income families, without such wealth, start out at a huge disadvantage. This is especially true for children of color from low-income families. Such families typically rent rather than own a house, and don’t earn enough to have any savings.

Throughout much of America’s history, the federal government has given families tax breaks in order to help them save and build assets – such as paying no tax on income that’s put away for retirement, and being able to deduct interest on home mortgages.

But these tax breaks mainly help those with high income and lots of wealth in the first place, who can afford to put away lots for retirement or get a large mortgage on a huge home. They don’t much help those with low incomes and minimal savings.

Families of color are especially disadvantaged because they’re less likely to have savings or inherit wealth, and face significant barriers to building wealth, such as discriminatory policies and practices that thwart home ownership. These structural disadvantages have built up to the point where the median net worth of white families is now more than 10 times greater than that of African-American or Latino families.

So what can we do to help all Americans accumulate wealth?

First, reform the tax system so capital gains – increases in the value of assets – are taxed at the same rate as ordinary income.

Second, limit how much mortgage interest the wealthy can deduct from their incomes.

Then use the tax savings from these changes to help lower-income people gain a foothold in building their own wealth.

For example:

1. Provide every newborn child with a savings account consisting of at least $1,250 — and more if a child is from a low-income family. This sum will compound over the years into a solid nest egg.

Research shows it could reduce the racial wealth gap by nearly 20% — more if deposits are larger. At age 18, that young person could use the money for tuition or training, a business or a home. Studies show such accounts can change children’s behavior and increase the likelihood they’ll attend college.

2. Allow families receiving public benefits to save. Today a family receiving public assistance can be cut off for having saved just $1,000. Raise the limits on what a family can save to at least $12,000—roughly three months’ income for a low-income family of four—and thereby put that family on the road to self-sufficiency.

All these steps would allow families to invest in their own futures – which is the surest way out of poverty. All of us benefit when everyone has the opportunity to accumulate wealth.
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https://www.salon.com/2016/04/28/robert_reich_wealth_inequality_is_even_more_devastating_than_income_inequality_partner/
 
Mortgage interest is already limited. The deductible portion of a primary residence is on a principal amount of $1 million.

Not to mention that the itemized deductions are further limited in total on wealthy individuals.
 
ChrisL68 said:
Mortgage interest is already limited. The deductible portion of a primary residence is on a principal amount of $1 million.

Not to mention that the itemized deductions are further limited in total on wealthy individuals.
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As is the amount tax-deferred retirement contributions. I have no idea who Robert Reich is, but he is clearly an idiot.
 
2&2 Slider To Leyritz said:
As is the amount tax-deferred retirement contributions. I have no idea who Robert Reich is, but he is clearly an idiot.
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Robert Bernard Reich (/ˈraɪʃ/;[1] born June 24, 1946) is an American political commentator, economist, professor, and author. He served in the administrations of Presidents Gerald Ford and Jimmy Carter and was Secretary of Labor under President Bill Clinton from 1993 to 1997.

Reich is currently Chancellor's Professor of Public Policy at the Goldman School of Public Policy at the University of California, Berkeley. He was formerly a professor at Harvard University's John F. Kennedy School of Government[2] and professor of social and economic policy at the Heller School for Social Policy and Management of Brandeis University. He has also been a contributing editor of The New Republic, The American Prospect (also chairman and founding editor), Harvard Business Review, The Atlantic, The New York Times, and The Wall Street Journal.
 
WTF does taxing capital gains have to do with people not saving? We are a consumer driven economy and society. People make money to spend it. Not smart for long term fiscal health, but it isn't my job or the government's to account for idiots. It should be common sense to save money.
 
EatLeadCommie said:
WTF does taxing capital gains have to do with people not saving? We are a consumer driven economy and society. People make money to spend it. Not smart for long term fiscal health, but it isn't my job or the government's to account for idiots. It should be common sense to save money.
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None his proposals have anything to do with saving, other then his asinine expectation that commieshifting money from group A to group B will result in group B continuing to save it once they have access to it and not simply go spend it on women or a new car.
 
Stupid poors should just buy more money and then save more money

Sent from my SM-G935T using Tapatalk
 
Provide every newborn child with a savings account consisting of at least $1,250 — and more if a child is from a low-income family. This sum will compound over the years into a solid nest egg.

Compounded at 7% annually thats 101K at age 65. I wouldn't call that a solid nest egg. And if you figure a 4% real return, that's only $16K in constant dollars. I actually like this idea, but Reich needs to rework his numbers.

reform the tax system so capital gains – increases in the value of assets – are taxed at the same rate as ordinary income.

Isn't this on some level, just a tax on inflation?
 
Who determines where the $1250 is invested?

Who has access to it and when?

One of the biggest problems with privatizing Social Security is that only a small percentage of the public is savvy enough to invest wisely. Plus, the rules the government would have to make would effectively put the government in charge of the program.

What would happen if the people lost the money? Are they going to die broke on the street?

Simple ideas are rarely simple in practical reality.

RE: capital gains - If professional gamblers have to pay regular income tax rates on their profits, then gambling on the market should be treated the same. Maybe if you raise capital gains a little, but not to regular rates, you could then raise the rates on same day, same week and same month at rates starting at the current marginal rates and going higher.
 
If you normalize capital gain rates with ordinary income are you going to eliminate the $3K limitation on capital loss deductions in excess of capital gains per year?
 
The Atlantic has had a series of articles about the middle class savings and income crunch, and about the apparent inability of even upper middle class Americans to save. This article has a really interesting take on the issue (and the other articles are linked from this one if you want to do more reading). The author's angle is that housing and education costs drive most of the issue, and further argues that housing cost is essentially a function of education cost for this group and so housing and education costs can be considered two sides of the same coin. Because our education system is so unequal, and because the consequences of a bad education are so dire (while the rewards of a good education are so great), middle class Americans are making a rational choice to spend beyond their means to live in neighborhoods with good schools, or purchase private education for their children.

It's an interesting lens through which to view the problem. While I am not sure what percentage of the problem to assign to this issue, I can certainly think of people I know personally who I know or at least strongly suspect fit into this category, and are making decisions around their kids' education that cause them to spend beyond their means and not save.
 
Location, location, location.

Those decisions also drive people away from city centers in favor of suburbs.

Also much of savings is for higher education expenses so it shouldn't be considered the same as a "rainy day" fund or retirement savings.
 
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