Mind... the (income) gap

[nsengkia]

That is the main crux of Buffett's argument: How can I be taxed at a lower effective tax rate than my cleaner?

. . .

One of the reasons why we don't want capital gains tax or abolish dividend tax is to simplify the tax code.

From a news report on Buffet's call for higher taxes for US super-rich:

"A long-time critic of the US tax system, he (Warren Buffet) has calculated that he handed over 17.4% of his income as tax last year – a lower proportion than any of the 20 other people who work in his office.

Under the debt ceiling deal agreed in Washington, a "super committee" of 12 congressmen and senators must find $1.5tn worth of savings and cuts to help cut America's national debt. Tax rises are hugely unpopular with elements within the Republican party, with the Tea Party movement adamant that America should balance its books by cutting public spending.

Buffett argues that this super-committee should raise the tax rate paid by those earning more than $1m a year, including earnings from capital gains which are currently taxed at a lower rate than ordinary income. Those raking in upward of $10m a year could then pay even more."

Specuvestor - I believe that Buffet is advocating for a higher capital gains tax and not higher income tax per say. I recall reading somewhere that his pay as CEO of Berkshire is only US$100K per year?

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Perhaps some statistics will be useful......rather than "oh, i read of this guy from poor background and blah blah".
I could be wrong but I remember i read somewhere that there is a much higher proportion of students in "good" schools with landed/private properties address. Can anybody confirm?

From an MOE reply to a forum letter in 2009:

"Our GEP pupils do not only come from rich homes or selected schools but from all socio-economic groups and the wide spectrum of society. They are drawn from about 115 of our 177 primary schools (i.e. 65%) and more than half (55%) live in HDB flats."

We can each draw our own conclusions.

[a74henry]

Education, willingness to work hard, dare to dream and do are important to reduce the income gap. Many tycoons are not born into a wealthy family. They build their own wealth.

[camelking]

Thank you, Nsengkia.

[NTL]

Iw

That is the main crux of Buffett's argument: How can I be taxed at a lower effective tax rate than my cleaner?

. . .

One of the reasons why we don't want capital gains tax or abolish dividend tax is to simplify the tax code.

From a news report on Buffet's call for higher taxes for US super-rich:

"A long-time critic of the US tax system, he (Warren Buffet) has calculated that he handed over 17.4% of his income as tax last year – a lower proportion than any of the 20 other people who work in his office.

Under the debt ceiling deal agreed in Washington, a "super committee" of 12 congressmen and senators must find $1.5tn worth of savings and cuts to help cut America's national debt. Tax rises are hugely unpopular with elements within the Republican party, with the Tea Party movement adamant that America should balance its books by cutting public spending.

Buffett argues that this super-committee should raise the tax rate paid by those earning more than $1m a year, including earnings from capital gains which are currently taxed at a lower rate than ordinary income. Those raking in upward of $10m a year could then pay even more."

Specuvestor - I believe that Buffet is advocating for a higher capital gains tax and not higher income tax per say. I recall reading somewhere that his pay as CEO of Berkshire is only US$100K per year?

---

Perhaps some statistics will be useful......rather than "oh, i read of this guy from poor background and blah blah".
I could be wrong but I remember i read somewhere that there is a much higher proportion of students in "good" schools with landed/private properties address. Can anybody confirm?

From an MOE reply to a forum letter in 2009:

"Our GEP pupils do not only come from rich homes or selected schools but from all socio-economic groups and the wide spectrum of society. They are drawn from about 115 of our 177 primary schools (i.e. 65%) and more than half (55%) live in HDB flats."

We can each draw our own conclusions.

Adding some more numbers for comparison. Based on Singstat, 82% of the housing is HDB, and 17% is Private. Thus, the former (82%) contributes 55% of the students, while the latter (17%) contributes 45% of the students. How that sounds?

[yeokiwi]

From an MOE reply to a forum letter in 2009:

"Our GEP pupils do not only come from rich homes or selected schools but from all socio-economic groups and the wide spectrum of society. They are drawn from about 115 of our 177 primary schools (i.e. 65%) and more than half (55%) live in HDB flats."

We can each draw our own conclusions.

Adding some more numbers for comparison. Based on Singstat, 82% of the housing is HDB, and 17% is Private. Thus, the former (82%) contributes 55% of the students, while the latter (17%) contributes 45% of the students. How that sounds?

Social mobility is highest when the country is developing and provides fair opportunities for all. The smart kids of hawkers, sweepers, shopkeepers, labourers etc in the 50s to 70s had already moved up in the social ladder and now, these smart kids in the past are having their children.

With smarter people occupying the upper strata of the society, it is likely that their offspring are as smart, probability wise.(but may not be as hardworking..).

So, in general, the social mobility will drop when a fair society has developed. It is kind of strange if the last generation of smarter kid, being successful themselves, have kids that performed on par or even lower than the kids from the lower strata of the society statistically.

But, why was it that the lower strata of the society in the past were able to move up so rapidly despite their parents were doing jobs that did not require much knowledge?

The answer is simply that many of those hawkers, sweepers, labourers etc in the past were not given a chance to learn and develop their specialities. They might be very smart but in that era, there were no opportunities for them to excel. However, their offsprings may carry their traits and with fair opportunity, they will outperform their parents.

My mum came from a poor family, completed primary school and was a hawker. But I think she is very intelligent. If she had given a chance to go to school till university, I think she will do very well.

[HitandRun]

Hi HitandRun

If this question can be answered precisely, I would be able to run a business on this You are looking at specifics but let me share with you the general idea.
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Thanks for the reply. I appreciate your effort to input all that stuff, although I might not agree with you.

Perhaps you cannot give a specific number, e.g. to the nearest 2 decimals , surely you do have a general idea or a range?

I asked all those questions because I believe they contribute to the big picture if one is a policy maker. Anecdotes are just that, anecdotes, because they are statistically insignificant.

1. What is the end point? Is the Gini cofficient a good guide? Based on Singstat and the modified OECD scale, current Gini is 0.457. What is your target?

2. Given the target, how much would you need to raise / tax to achieve it? According to Singstat, "Singapore’s Gini would be 0.457 (before Government transfers and taxes) and 0.437 (after Government transfers and taxes) in 2012." AND more importantly, "on average, resident households received $1,340 of transfers per member from various government schemes in 2012. Those in HDB 1- & 2-room flats received the most, at an annual average of $6,140 per household member, followed by those in HDB 3-room flats at $1,530 per household member on average." Assuming there are 3 members in each household, each 1- & 2-room flats household received (6,140 - 1,340 * 3) a total of SGD14,400 extra to improve the Gini from 0.457 to 0.437.

3. Given the level of funding required, where is the tax base that you will draw from? Refer to my previous example of the 1,000 rich man. There is no way to tax only them to shift the needle. We will have to cast our attention at the top decile household or more. According to Singstat, the top decile household income is approx 27k. If we assume 2 working members per household and deduct employer CPF, average annual income per working member will be around 152,000. How much more tax a person with that kind of salary ought to pay? Or do we spread the tax burden even lower?

[camelking]

From an MOE reply to a forum letter in 2009:

"Our GEP pupils do not only come from rich homes or selected schools but from all socio-economic groups and the wide spectrum of society. They are drawn from about 115 of our 177 primary schools (i.e. 65%) and more than half (55%) live in HDB flats."

We can each draw our own conclusions.

Adding some more numbers for comparison. Based on Singstat, 82% of the housing is HDB, and 17% is Private. Thus, the former (82%) contributes 55% of the students, while the latter (17%) contributes 45% of the students. How that sounds?

Social mobility is highest when the country is developing and provides fair opportunities for all. The smart kids of hawkers, sweepers, shopkeepers, labourers etc in the 50s to 70s had already moved up in the social ladder and now, these smart kids in the past are having their children.

With smarter people occupying the upper strata of the society, it is likely that their offspring are as smart, probability wise.(but may not be as hardworking..).

So, in general, the social mobility will drop when a fair society has developed. It is kind of strange if the last generation of smarter kid, being successful themselves, have kids that performed on par or even lower than the kids from the lower strata of the society statistically.

But, why was it that the lower strata of the society in the past were able to move up so rapidly despite their parents were doing jobs that did not require much knowledge?

The answer is simply that many of those hawkers, sweepers, labourers etc in the past were not given a chance to learn and develop their specialities. They might be very smart but in that era, there were no opportunities for them to excel. However, their offsprings may carry their traits and with fair opportunity, they will outperform their parents.

My mum came from a poor family, completed primary school and was a hawker. But I think she is very intelligent. If she had given a chance to go to school till university, I think she will do very well.

Yes, social mobility seemed to have slow down as a country "matures". To me, a permanent elite or/and high class has formed and it is getting harder and harder to get in.
I work for a very rich man and get the chance to witness doors are opened for him and MORE IMPORTANTLY, his rather nice but average children.

Of course, what i witnessed could be an isolated case...unless statistics proved me otherwise......

[KopiKat]

It is kind of strange if the last generation of smarter kid, being successful themselves, have kids that performed on par or even lower than the kids from the lower strata of the society statistically.

Some of the last generation smart kids spoil their own kids by giving them 'too much' material stuff while they're too busy making more money to maintain their lifestyle. Without proper supervision, some of these kids become disinterested in their studies and with too much free time on hand, prefers to enjoy themselves thoroughly with their material stuff + spending power. They do badly in school, get into disciplinary problems (some even joined / start a gang). Inevitably, they ended up with lower educational qualifications and are either forced to take on lowly paid jobs or in most cases, gets roped into businesses by their relatives (most likely parents behind the scenes). After numerous 'hardships', some may see the light and start working hard for themselves and actually become successful (many will not succeed and end up moving socially downward when their parents are no longer around to help them). We then get to read about their success stories in Sunday Times and their boasts about how they were 'greatly disadvantaged' as they'd done badly in their studies when they were young...

[smallcaps]

It is kind of strange if the last generation of smarter kid, being successful themselves, have kids that performed on par or even lower than the kids from the lower strata of the society statistically.

Some of the last generation smart kids spoil their own kids by giving them 'too much' material stuff while they're too busy making more money to maintain their lifestyle. Without proper supervision, some of these kids become disinterested in their studies and with too much free time on hand, prefers to enjoy themselves thoroughly with their material stuff + spending power. They do badly in school, get into disciplinary problems (some even joined / start a gang). Inevitably, they ended up with lower educational qualifications and are either forced to take on lowly paid jobs or in most cases, gets roped into businesses by their relatives (most likely parents behind the scenes). After numerous 'hardships', some may see the light and start working hard for themselves and actually become successful (many will not succeed and end up moving socially downward when their parents are no longer around to help them). We then get to read about their success stories in Sunday Times and their boasts about how they were 'greatly disadvantaged' as they'd done badly in their studies when they were young...

Not strange at all IMO. Born rich kids are disadvantaged from the start since their parent's wealth prevents them from experiencing real hardships. The best is to be born poor but yet society gives you the chance to climb out of it. But then, their kids would be born rich right? And the cycle repeats...

[CityFarmer]

It is kind of strange if the last generation of smarter kid, being successful themselves, have kids that performed on par or even lower than the kids from the lower strata of the society statistically.

Some of the last generation smart kids spoil their own kids by giving them 'too much' material stuff while they're too busy making more money to maintain their lifestyle. Without proper supervision, some of these kids become disinterested in their studies and with too much free time on hand, prefers to enjoy themselves thoroughly with their material stuff + spending power. They do badly in school, get into disciplinary problems (some even joined / start a gang). Inevitably, they ended up with lower educational qualifications and are either forced to take on lowly paid jobs or in most cases, gets roped into businesses by their relatives (most likely parents behind the scenes). After numerous 'hardships', some may see the light and start working hard for themselves and actually become successful (many will not succeed and end up moving socially downward when their parents are no longer around to help them). We then get to read about their success stories in Sunday Times and their boasts about how they were 'greatly disadvantaged' as they'd done badly in their studies when they were young...

Not strange at all IMO. Born rich kids are disadvantaged from the start since their parent's wealth prevents them from experiencing real hardships. The best is to be born poor but yet society gives you the chance to climb out of it. But then, their kids would be born rich right? And the cycle repeats...

To break the cycle, the kids should be brought-up as poor kids even the parents are rich.

There are no shortage of example. Taiwan's president Mr. Ma's daughters are a good example. I believe the same for MM Lee's and PM Lee's kids