the problem

Washington Post

“Carried interest was intended to motivate managers going forward,” said Victor Fleischer, an expert in carried interest at the University of Colorado law school. “In cases like the Romneys, it just shows it is really all about fancy tax planning. It’s not motivating managers going forward. Not only is Mitt not providing any future services, Ann never did.”

In recent years, the carried-interest deduction has proved controversial on Capitol Hill. There have been several unsuccessful efforts to eliminate the tax break, which critics say improperly treats profits like capital gains, and tax these earnings as ordinary income at 35 percent.

Some tax experts worry that the arrangements Romney benefits from set a bad precedent for a president. “He looks for every tax angle to a degree that is unbecoming in someone who would be the executive in command of the administrative apparatus that enforces the tax law,” said Lee Sheppard, a tax lawyer and contributing editor for Tax Analysts, a publication for accounting and legal professionals.

Only the rich and connected get to treat their labor as if it were capital (and thus get a 50%+ “motivational” tax break) . This is *the* problem, not a solution.

NYT: Oligarchy, American Style http://mobile.nytimes.com/article?a=862905

The budget office laid out some of that stark reality in a recent report, which documented a sharp decline in the share of total income going to lower- and middle-income Americans. We still like to think of ourselves as a middle-class country. But with the bottom 80 percent of households now receiving less than half of total income, that’s a vision increasingly at odds with reality.

In response, the usual suspects have rolled out some familiar arguments: the data are flawed (they aren’t); the rich are an ever-changing group (not so); and so on. The most popular argument right now seems, however, to be the claim that we may not be a middle-class society, but we’re still an upper-middle-class society, in which a broad class of highly educated workers, who have the skills to compete in the modern world, is doing very well.

It’s a nice story, and a lot less disturbing than the picture of a nation in which a much smaller group of rich people is becoming increasingly dominant. But it’s not true.

Read the article and the first few comments for some star lessons in math and history. The math and the history are the largest factors for me. When the majority of a society doesn’t see a point to being a part of that society, its just a matter of how and when it’s going to collapse, not if.

There are steps one can take to avert such a thing. The question remains if they can be implemented. Right now, it seems about half the political class wants to go full bore the wrong direction (I.e. implement regressive tax increases, eliminate capital gains taxes, etc.)