Mind... the (income) gap

[a74henry]

In life, it is good to be contented.

Ultimately, one can only wear a pair of shoes or drive a car at a time. Variety of cars are good to see, however, owning a variety of cars is one of the fastest way of wealth destruction in Singapore (unless you are in a car distributor or showroom business). Of course, the fastest wealth destruction is pulling the Jackpot.

So long as one spends less than one earns and invests the savings wisely, the income gap can be narrowed. Got to crank up more money making ideas to reduce this gap.

[paullow]

along the same lines, another extremely fast way to destroy one's wealth(which actually is not uncommon, fueled by greed) is to use contra to chase penny stocks.

[sgd]

along the same lines, another extremely fast way to destroy one's wealth(which actually is not uncommon, fueled by greed) is to use contra to chase penny stocks.

A fortune starts from somewhere how do you think the present tycoons who are still alive in the 70's and 80's how do you think they first made their fortunes? A lot of younger people admire and study them but don't have a clue.

It is by none other than gambling, speculation, risk taking, chasing penny stocks the very thing that you peoples forsake.

[paullow]

i guess u got a point. but they dared to take the risk n made it big. for local tycoon kwek hong png; he dared venture out of cement industry to buy huge pieces of valuable land in s'pore propelling himself to immense wealth during the boom years from the 1960's-80's. having said that, for those tycoons in their 70s or 80's who made it big, i think i can say that there are countless others who din make it n ended up broke, some even on public aid.[/align]

[sgd]

i guess u got a point. but they dared to take the risk n made it big. for local tycoon kwek hong png; he dared venture out of cement industry to buy huge pieces of valuable land in s'pore propelling himself to immense wealth during the boom years from the 1960's-80's. having said that, for those tycoons in their 70s or 80's who made it big, i think i can say that there are countless others who din make it n ended up broke, some even on public aid.[/align]

Yes exactly risk and speculation works both ways can win and can lose, but consider these people who came here in the 1930's and 40's in their teens they only have a shirt on their back maybe a few dollars what they know about doing business or investing or value investing? All of them were illiterate all started out as laborers they saved money and what do you think they did to try to make a return? What kind of opportunities to make more money do illiterate laborers or coolies have? Gambling lor.

So when won enough to have seed money most started import/export business buy goods from malaysia or china and sell to singapore. And when they made more money later they speculated in property and in shares. The only way they know how is to speculate. Of course those who lost money we will never heard of them.

That's why during my army days I see my camp mates hokkien pengs from very poor background spend all their money on gambling and I couldn't understand for many years why they so hardup already still want to gamble.

[kbl]

Hi HitandRun Sir,

Good morning. You looking for me? What orang kaya?

And I thought I caught a glimpse of Mr orang kaya kbl

[specuvestor]

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?

I had wanted to spend some time answering you in detail but been too caught up with stuff. Since you are also aware that I put in a lot of time on the posts maybe you can tell us specifically where u disagree?

Due to time constraints suffice to say that I am not a believer of a singular number explanations. I am not even sure why people like to use just ONE figure like PE or ROE or Book to explain very complex dynamics. The recent debacle on Debt/GDP trying to explain growth is a good live example.

I don't even think policy makers generally look at gini coefficient for policy making. I think it's a jargon used more by consultants and economists. Just like we value investors don't look at beta or volatility of stock prices because we don't even believe stock markets are perfect. And I don't even understand what 0.45 means in REALITY. I can understand the Lorenz curve which the coefficient is based on and say we want to target say 30% of people owning 70% of the wealth. I can visualise that target. I cannot visualise what is the meaning of gini coefficient of 0.457 even though they are related and it loses the information on the slope of the Lorenz.

Redistributiion of wealth is much more powerful than most estimates. Economists frequerntly underestimate the purchasing power of free choice and fiscal policies (IMF admits underestimating fiscal multiplier) And people MISTAKEN it by the "Robin Hood" theory of stealing from rich giving to poor (Just read the media). The idea behind it is to GROW THE WEALTH and share the fruits more equitably, and specifically the middle class. We as Asians have seen it in China 10 years ago when the middle class boomed and now in our neighbour Indonesia. India would be next if it gets its policy right. Having a strong aristocratic or super rich NEVER HELPS, socially or financially. There's only that many number of shoes that Imelda Marcos can buy

On your last question: You either tax 1000 richman with ZERO impact on their lifestyle (ie consumption habits) or 100,000 households who will reduce their consumption and hence spending. You decide As I mentioned, a rough equitable level is that we are taxed roughly similarly to our expenses rather than income, as rich people save much more, hence the purpose of GST, cess, PARF or luxury tax, though they have their specific design problems.

[HitandRun]

Specuvestor

Thanks for the reply.

I have to re-read the thread to remember what the debate is about.

Conceptually, I agree with you. I have no problem with progressive taxes. Aren't taxes already progressive at the moment? I have no problems with taxes being even more progressive.

However, I have a big problem with folks thinking that the policies will only tax the "rich", the "rich" being defined as someone else. In order for the tax policy to be meaningful, the tax base must be sufficiently big. By definition, all folks earning more than the median income could be the target of the tax policy. Does everybody realise that? I know the brain dead editor of ST does not. He was referring to someone else too. At the end of the day, I was hoping to answer 2 questions, a. What is the tax base you are targeting at? and b. How much do you wish to raise from the exercise?

[Temperament]

To me GST is a terrible tax for the poors, and below average earners, retirees, all non-working living beings. Even a growing foetus are not spared the GOH SAYS TAX.

[sunrocker]

I actually disagree with progressive tax IMO...

Why should the rich be tax more than the more? It's like a punishment to earn more isn't it? The rich work for it, it is not as if GOD gave it to them?

P.S. I'm not rich