2025-04-03 02:56:15
It’s tax season in the U.S. At least 60 million Americans have taxes that are so simple, the IRS could do them automatically and just send them the bill. Instead, the average American spends $270 and 13 hours filing their taxes each year. Is anyone surprised that the IRS is the least popular federal agency, according to Pew?
Last month, DOGE came for the tax man. Half of the IRS workforce, 90,000 people in total, is reportedly on the chopping block. Meanwhile, Republicans in Congress are inching closer to extending Trump’s 2017 tax cuts. Some people will cheer these developments. They’re good news … for the wealthy, i.e. Owners. But lowering tax rates and decimating IRS enforcement capabilities are jazz hands. Our tax code exacts a high price on Earners, i.e. everyone else, especially the young. And the price is even higher when enforcement is rendered a paper tiger, as the shortfall is either added to the debt, or used as a pretext for cutting programs like Medicare, Medicaid, and Social Security. As Warren Buffet once said, there is class warfare in America, “but it’s my class … that’s making war, and we’re winning.”
This post was originally published last May, but the war remains the same: Owners are crushing it, Earners are getting crushed, and the battlefield, aka the U.S. tax code, continues to be a weapon of mass distraction. You can read the original post here.
Over the past several decades, America has waged a covert war against the young. One front in this war is our income tax system, which favors Owners over Earners. Young people are almost all Earners, while Owners are typically older, and the tax code is a wealth-transfer vehicle for Owners to garner a greater share of our common wealth. The good news? It can be changed … back.
If you get a paycheck, whether it’s salary or freelance, and that’s how you pay your bills, you’re an Earner. Owners, on the other hand, might collect wage income, but their real money comes through profits from investments: stock sales and dividends, rent from property, and other income streams derived from the ownership of assets. To be an Earner is noble; you work for a living, and labor is a sacred thing. Labor is the source of food, shelter, entertainment, and every material pleasure of society. We even celebrate it with a holiday, the first Monday in September. Pro tip: If you want to celebrate Labor Day somewhere awesome, try as hard as you can to become an Owner.
Owners also get a celebratory day. It’s April 15. Another pro tip: If you’re ever featured in a commercial calling you a “hero,” it means you’re getting fucked. The most fortunate in our society have no holiday, as they don’t need one. They recognize that holidays wallpaper over the inequity faced by anybody who gets a day in their honor.
Income taxes for Earners are deceptively straightforward. Take your annual income, subtract the standard deduction ($24,000 for a married couple), make a few other calculations, and then pay a percentage of what’s left to Uncle Sam. And the income tax rates for most people are low: A two-adult household making less than $100,000 per year pays 10% or less in federal income tax. Many pay much less, or none at all. Sounds reasonable, right? But there’s a catch. Several … catches.
First, for those paying “only” 10% or less of their wages in income taxes, other forms of tax are a heavier burden. At the federal level, Social Security and Medicare add almost 8%. Then all states collect taxes, and most state tax systems are “regressive.” All told, lower-income people pay a greater portion of their income in taxes than many rich people.
Sales tax, property tax, and other government revenue sources (licensing fees, permits and filing fees, and car registrations) take a larger bite out of lower-income households. In “low-tax” Florida, the most regressive state, low-income families (Earners) pay 13.2% of their income in state and local taxes, the middle class pays 9.1%, and the top 1% (Owners) pays just 2.7%. In fact, lower- and middle-income Florida households pay about the same in total taxes as they would in “high-tax” California. The next time you hear someone complain about low-income people who “don’t pay any taxes,” remind them that income tax doesn’t exist in a vacuum — low-income people often pay over 25% of their income in taxes.
There’s a myth that the rich don’t pay their fair share of taxes. The reality is most “rich” people — the super-earners — pay more than their fair share. A married household making more than $500,000 per year is in the top 5% of households by income and pays an effective federal income tax rate around 25%. Half a million dollars may seem like a lot, but careers that pay that well require expensive college and graduate degrees, entail long hours, offer little job security, and they’re typically in high-cost-of-living locations with high state income tax — in New York or California, add another 10% on to that 25%. With other taxes, including sales tax, the total tax burden borne by mid-career professionals can reach 40% of their income. The baller who makes seven figures plus is often working for the government: Their (total) effective tax burden can approach 50%. Until, that is, they can make the jump to lightspeed (i.e., become an Owner).
Think of building wealth as launching a rocket ship into orbit. Rockets burn 95% of their fuel to escape Earth’s soupy atmosphere and incessant gravity. Once you get to orbit, you’re a master of the universe — covering thousands of miles with just a touch of propulsion. Wealth is similar. The atmosphere is your expenses; the distance traveled, your income. Most of us never generate enough current income to make the jump to space and become an Owner — save enough to invest so our primary source(s) of income are passive. Investing is difficult, if not impossible at low income levels. Saving your first $100,000 is incredibly hard. The next $100,000 is tough, but you now have momentum and start to see the curvature of the Earth. Once your current income is substantially greater than your expenses, and you’ve deployed an army of capital that fights for you and your family in your sleep, you’ve made the jump. What we’ve done with the tax code has rendered the atmosphere thicker and gravity stronger. Go to law or medical school, or live at the office, and you’ll see your (current) income increase, but you’ll also lose a bigger share to taxes, and the harder it gets to save and escape the gravity of being an Earner.
Imagine if taxes worked like this: Everything you spend that’s remotely related to work is deducted from your taxable income. Clothes you wear and food you eat during the work week, your car, your internet and cellphone bills, furniture and square footage where you work at home (e.g., kitchen table), etc., all taken off your income before taxes. Pretty much anything you do on days you’re working, deductible. All past investments in education, deductible. If you spent more than you earned, as you did in college and graduate schools, you can roll over those losses as deductions in future years. In the meantime, deduct any credit card interest you’re paying. Any money you don’t spend? That’s not taxed until you retire and start spending it. If you give it to your kids, it’s never taxed at all.
If this sounds familiar but awkward, it is. It’s our tax code, through the lens of the Owner. The federal income tax code looks progressive: The highest marginal tax rate is 37%, more than 3x what the average American pays. But published tax rates are a weapon of mass distraction. They are the “rack rate” published on the door of your hotel room. Owners never pay the rack rate. They barely pay at all.
Unlike Earners’ taxes, Owners’ taxes are complex. As a result, determining the total tax burden of the very wealthy is difficult, but here’s what we know: In 2020 the 26,000 households with an income over $10 million paid 25.5% of their reported income in federal taxes, plus 5% to 10% in state and local taxes. But as I explain below, much of the cash they receive isn’t taxable income, and most of the increase in Owners’ wealth is never taxed at all. The White House has estimated that the 400 wealthiest households pay an effective income tax rate of just 8.2%, and ProPublica found that the wealthiest 25 households pay just 3.4%. We can’t say for sure what percent Owners pay on average, but it’s less than most of their employees pay. This complexity results in a transfer of wealth from Earners to Owners. The tax code has exploded from 400 to 4,000 pages in the past few decades. If you have GPS (advisers, loopholes for the wealthy), you want races run at night.
If the government is meant to decrease suffering and add happiness, then our current system makes no sense. Paying taxes of $5 million on $10 million in income is the difference between flying first class and flying private. Paying $15,000 on $60,000 in income might mean foregoing a second child.
Capitalism means accepting a society of winners and losers. And that’s OK. Wealth is a great reward for hard work, and talent is what drives us to create value. Capitalism has brought prosperity to billions over the past 150 years. The problem is the system, if left unchecked, becomes increasingly inequitable and unsustainable. We’ve morphed from capitalism to cronyism, rigged in favor of Owners. How? Three ways: calculation, timing, and collection.
Amateurs focus on tax rates. Professionals zero in on the calculation of the income to which those rates apply. In the 1950s the highest federal income tax bracket was 91%. Except nobody paid it. The tax code was a mosaic of loopholes, ensuring high-income taxpayers were able to shield most of their income. Now the top rate is 37%, but while the colors and fabric have changed, the Owner’s tapestry of tax avoidance still exists.
Owners receive cash from a range of sources: rent from tenants, dividends from stock, interest from loans, distributions from trusts, profits from investment partnerships, loans and lines of credit from banks, proceeds from asset sales, and more. Much of this income is shielded by pages of tax code defining what is, and is not, taxable. Owners who invest in the oil business leverage tax code provision section 263 (intangible drilling costs), section 613 (percentage depletion), section 611 (cost depletion), section 167 (geological expenses), section 199 (domestic production deduction), section 193 (tertiary injectant expenses), and section 469 (active losses). That’s just one industry.
Entrepreneurs are barely visible to the Treasury standing behind the tax code. Section 1202 excludes the first $10 million received in the sale of a business, a provision that saved me millions of dollars when I sold my firm L2 several years ago. When working at the firm — earning — I was paying 40+% taxes. But when I sold the business, my tax rate on the proceeds — owning — was 17%. Even before selling, every small business owner gets an enormous shield, the power to push all manner of personal expenses through the company income statement, thus making them tax deductions for the business rather than taxable income for the Owner.
Income that’s acquired by selling an asset for more than you paid for it is a capital gain, and isn’t subject to ordinary income tax rates. Capital gains rates (federal) max out at 23.8% instead of 37%. That’s still not the biggest loophole. Capital gains are only taxed when “realized” (typically when sold), so Owners’ assets grow tax deferred (some you can depreciate as they go up in value) and their sales are timed to minimize taxes. Earners lose 20% to 50% of their gains (from sweat) every year, a massive gravitational pull. Owners enjoy cleaner propulsion: As their wealth grows, the taxes are deferred until they sell … if they ever do.
But wait, there’s more. The biggest tax break Owners can register is dying, which resets the “basis” of their assets, so their heirs never pay taxes on the increase in value. Still, there’s more. The most indefensible loophole award goes to the “carried interest loophole” which permits investment fund managers to pay capital gains rates on their compensation. Tax policy groups have been lobbying to close this loophole for years, and Congress nearly did it in 2022, but Senator Kyrsten Sinema took $2 million from the private equity industry (aka Owners) and saved their $14 billion loophole. It’s well known that our leaders are whores. What’s more surprising, and disappointing, is what cheap whores they are ($2 million for $14 billion). But I digress.
Owners are so tax-advantaged that if they do have earned income, they often shield that from taxation as well. Donald Trump paid virtually no income taxes on the $427 million he made from The Apprentice — where he had an actual job — by offsetting that cash income with paper losses on his real estate properties (real estate is another of the most tax-advantaged industries). In 2007, Jeff Bezos made $46 million in actual income, yet he paid zero dollars in federal income tax, because he was able to shield that income with paper losses as an Owner (in reality, his wealth increased $3.8 billion that year). In 2011, not only did Bezos pay no income tax again, he claimed and received a $4,000 child tax credit — a program intended to lower child poverty. If you paid federal income tax in 2011, you helped feed Jeff Bezos’s kids. Don’t worry, he’s fine.
A key advantage of control over timing is state income tax arbitrage, practiced often by company founders. Several years ago, the media discovered the phenomenon of California entrepreneurs moving to Texas and Florida, and there was a lot of jazz hands about those states’ friendly business climates and youthful energy. The truth was simpler: Texas and Florida have no state income tax, and many of those founders were about to recognize enormous gains via sales of stock that had become worth billions. Elon Musk, who moved to Texas in 2020, sold millions of shares of Tesla, saving an estimated $2.5 billion in California income tax. When Washington State enacted a tax on income from asset sales, Jeff Bezos decided to spend more time with his father in Florida, which has no income tax, and sold 50 million shares of Amazon after he relocated. If taking advantage of Washington’s schools, roads, and tech ecosystem to build wealth, and then declining to pay taxes back to the state sounds wrong — and a massive additional burden on middle-class taxpayers who can’t peace out to Coral Gables — trust your instincts.
The best time to pay taxes is never, using the infamous “Buy, Borrow, Die” tax strategy. Wealthy Owners take out loans secured by assets such as company stock or real estate, and live off the loans (which are not considered taxable income) instead of selling the assets (which would incur a taxable gain). When the Owner dies, the stock goes to their heirs, who, with their “stepped up basis,” can sell enough stock tax-free to pay off the loans and start the cycle anew. This creates dynastic wealth, the lack of which used to be a key point of differentiation between Europe and the U.S. Used to be.
All of these strategies are legal and enabled by the complexity of the tax code. But that complexity also affords Owners another means of avoidance: cheating.
Skirting taxes stems from the complexity of the tax code itself. Wealthy filers can take deductions that don’t apply or classify income in inappropriate ways. And without an exhaustive analysis of the facts, there’s no way for the IRS to determine what they’ve done. Some of the losses Trump used to offset his income from The Apprentice may have been illegal — the IRS believes he claimed hundreds of millions of losses on a Chicago real estate project twice, burying the double-dip under a mountain of tax paperwork so tall it’s taken the IRS a decade to dig through it.
Owners can also choose to cheat bluntly, failing to report substantial income and making up fake expenses and losses. This was New York hotelier Leona Helmsley’s strategy. Before going to prison for tax evasion, she told her housekeeper, “We don’t pay taxes; only the little people pay taxes.” Offshore entities are a time-honored strategy for tax evasion. Trump’s campaign manager, Paul Manafort, concealed $16.5 million in income from the IRS in foreign bank accounts.
The Treasury’s analysis suggests $600 billion in owed taxes are not paid every year, equivalent to the total income taxes paid by the lowest-earning 90% of taxpayers. The avoidance is solely the domain of ownership income — 99% of the taxes owed on wages get paid. Owners can do this because Congress has starved the IRS of funding, and the agency audits fewer and fewer returns each year.
Remedying these inequities is nowhere near as difficult as it would be to address many of the other challenges facing America. The most obvious and glaring remedy is to fund the IRS, enabling it to collect hundreds of billions in taxes owed but not paid. The Inflation Reduction Act was supposed to allocate $80 billion to the IRS over the next 10 years, but Republicans have attacked the measure, cutting $20 billion from the plan and keeping the IRS budget flat in 2024. Every $1 invested in tax enforcement targeting the wealthy returns $12 in revenue. To be clear, this isn’t harassment but enforcement. Most externalities are a function of incentives, and the government has incentivized owners to be incredibly aggressive on their tax returns, as there is little chance they’ll get caught. If you were on a highway with no police, would you speed?
Eliminating the special treatment given to capital gains is a simple fix that would increase tax revenue without increasing the tax burden of most Americans, reduce the incentive to cheat through misclassification, and make the tax system more fair. So would eliminating the step-up basis upon inheritance, which wipes away billions in taxes owed by the wealthiest people with little justification or social benefit. We should remove the income cap on social security tax (currently a paltry $160,000), which would help shore up the social security trust fund and make the tax code (not rates) more progressive. We should restore the highest marginal tax rate (for owners) to 40%. Biden and congressional Democrats have proposed all of these changes in recent years, but to no avail.
Since ownership carries with it some inherent tax advantages, a transaction tax would raise revenue from ownership in a fair manner. Numerous proposals, including one from Mike Bloomberg, for a 0.1% tax on securities trades and other financial transactions could raise nearly $80 billion per year, with the potential side benefit of damping high-frequency trading, which adds volatility without benefit to the markets. We should also levy a compute tax on cloud and AI services, as the wealth created by these innovations is accruing mainly to the wealthiest Owners. Compute is the new energy, and this is a chance to avoid the mistakes of fossil fuels, where we give tax breaks to Owners and stick Earners with gas taxes, among the most regressive surcharges in our system.
Finally, and most transformationally, Congress should take a chainsaw to the tax code, cutting the thousands of handouts to the ownership class that have been stuffed into it by lobbyists. Theoretically, finding the political will shouldn’t be difficult, as the majority of Americans are getting screwed by lawmakers representing a small number of their fellow citizens. Ironically, the Trump tax cuts paved the way for this change — by doubling the standard deduction, Trump ensured that just 10% of taxpayers take any itemized deductions — meaning 90% of voters should support eliminating the rest of them. Still, it may be a challenge, as the most valuable asset Owners own … is Congress.
We should reinvest some of the hundreds of billions of dollars per year gained by these changes to make the system fairer for Earners (i.e., the young):
Below is a rough revised set of brackets that, with greater enforcement and the elimination of the Trump tax cuts on corporations, should get us to the same or greater revenue:
I am troubled by the trend away from patriotism, fomented by a tech-billionaire class that conflates luck with talent, shitposts America, and prosecutes an economic war on the young. But America’s promise does not resonate unless it’s backed by performance. We diminish what’s great about America when we fail to talk about what’s broken in America. Especially when the fixes are within our grasp.
In defense of shielding Owners, lobbyists and our representatives in D.C. argue the wealthy are our most productive citizens, can better deploy capital, and need incentives to keep innovating. There is some truth to this notion, but we aren’t lowering taxes on the bulk of today’s innovators, the super-earners, or on future innovators, young people. Instead, we are ensuring a failure to launch by transferring more wealth to Owners/seniors. The three legs of the tax stool are corporations, super-earners, and super-owners. Corporate taxes are at their lowest levels since 1939 and the wealthiest Americans are paying single-digit tax rates, meaning the entire funding burden of our country rests on the super-earners and the young, who’ll have to survive the tsunami of debt we are aggregating to finance this inequity. This is capitalism collapsing under its own weight.
America, like any country, is a product — a mix of benefits that come at a price. America has been the best value (globally) for the better part of three centuries. Other than drugs, there is no other product so many people are willing to risk their lives to obtain. However, the value of America has diminished for super-earners and the young. We’re charging the former too much, and keep asking the latter if we can borrow their credit card. The bad news? This was deliberate, our decision. The good news? We can decide to fix it.
Life is so rich,
The post Earners vs Owners appeared first on No Mercy / No Malice.
2025-03-28 23:13:05
Democrats need to be the party of ideas, not indignation. Our “Project 2028” series addresses critical issues facing America through a No Mercy / No Malice lens. Today, we shift from housing to wages.
Before he was sworn in as Treasury secretary in January, hedge fund manager Scott Bessent warned that failing to extend $4 trillion in tax cuts would trigger an “economic calamity.” This is true if “calamity” means a reduction in the wealth of the richest Americans and large corporations. What bullshit. The real calamity is the poverty and inequality that’s set to worsen as the Trump administration advances policies that will disproportionately benefit a small number of people (see above: the richest Americans).
The illusion of complexity is weaponized by the incumbents to mask a simple truth: The clearest blue-line path to a decrease in obesity, depression, incarceration, gun deaths, divorce, diabetes, homelessness, and crime is … wait for it … to put more money in the pockets of lower- and middle-income citizens. And the easiest way to do this is to hike the minimum wage. Raising the pay floor to $25 an hour would ensure that Americans can afford to have children (if they want), feed their families, and pay for housing and health care. In 2009 the minimum wage was $7.25. Since then, the cost of a Big Mac, the average rent, and the Nasdaq have risen 60%, 70%, and 800%, respectively. Meanwhile, the minimum wage has rocketed from $7.25 to … $7.25.
Even though many states and cities have raised their minimum wage, 1 in 4 U.S. workers still makes less than $17 an hour. With the government failing to act and many companies content to sequester record profits at the expense of the working class, leaders of successful American businesses should step up — CEOs who are willing to pay as much as they can, not as little as they can get away with.
The system is broken when 18 million U.S. households are struggling to secure enough food, and 12 million renter households are “severely cost burdened,” spending more than half their earnings on housing and utilities. In theory, wages are dictated by the market. But the market is inherently imbalanced, and employers are the ones who have the upper hand. The government has the power to level the playing field by setting the floor on compensation at a “living wage” — what a full-time worker must earn on an hourly basis to cover the cost of their family’s basic needs. This should be table stakes. In a society where one company (Nasdaq: NVDA) adds $277 billion in market capitalization within five minutes of its earnings release, and 1 in 5 households with children is food insecure, we have decided that America is an operating system to optimize the output of the bottom 99% for the benefit of the top 1%. Enough already.
But a living wage means much more than that. Vulnerable workers are less likely to defer medical care, suffer from depression and anxiety, or commit suicide. Less likely to burden emergency rooms, lose their job due to illness, or get saddled with crippling debt. We know increasing family income dramatically improves childhood development, producing better-educated and healthier adults. It’s also a race- and gender-blind means of redressing inequality in pay and increasing opportunities for women and ethnic minorities, who are overrepresented in low-wage jobs. This is affirmative action as it was meant to be: focusing on people who need it most vs. their identity.
In Los Angeles, a single adult without children needs an hourly wage of $27.81 to cover basic costs, according to MIT’s Living Wage Calculator. Two working parents with two children must each earn $32.69 an hour. L.A. is expensive, but the living wage in many parts of the country isn’t significantly lower.
In Kansas City, the living wage for a single adult is $22.75, or $27.55 for two working parents with two kids. In Mississippi, the poorest state in America, you’d need to make an hourly wage of $20.75 or $22.43, respectively.
In his confirmation hearing, Bessent said he sees the minimum wage debate as “more of a statewide and regional issue.” Elected leaders are big on “states rights” as a weapon of mass distraction when it suits their agenda. And indeed, many states have stepped into the void. By 2027, 19 states and Washington, D.C. — covering almost half the U.S. workforce — will likely have a minimum wage of at least $15 an hour. But this is a critical federal issue, one that Democrats should continue to spotlight. The meager minimum wage has a knock-on effect, keeping pay lower for millions of people.
The numbers paint a depressing picture. Although relatively few people receive the federal minimum, many are struggling to stay afloat. Almost 6 in 10 jobs pay less than $25 an hour. There isn’t a single state, metro area, or county in the U.S. where a full-time, minimum-wage worker can afford a modest two-bedroom rental.
You always hear the same bullshit narrative from opponents of increasing the minimum wage. They argue it will hamper the competitiveness of businesses and lead to closures and job losses, hurting the workers it’s meant to help. If employers have to pay workers more, they’ll hire fewer of them. These are scare tactics: Research shows raising the minimum wage would have little to no impact on employment. In fact, it can have a stimulative effect as workers spend their additional earnings. When paid well, workers are more productive, and they’re less likely to leave, reducing costs for employers. Some businesses fold, and they should. They are the weakest performers and, quite frankly, shouldn’t be in business. The lost employment is mostly absorbed by stronger firms.
Another way businesses adapt to higher wages is by raising prices. But economists find it leads to scant price hikes. One analysis of restaurant food pricing between 1978 and 2015 showed prices rose by just 0.36% for every 10% increase in the minimum wage. There’s rarely a free lunch, and some companies (e.g., McDonald’s, Walmart) would register a significant decrease in profits and share price. It would be worth it.
For much of the 20th century, unions played a critical role in trying to equalize the balance of power and obtain higher wages for workers. However, unions have struggled to overcome corruption, adapt to innovation, and maintain relevance. The share of U.S. workers who belong to a union fell to about 10% in 2023, from about a third in the 1950s. Although 70% of Americans say they approve of labor unions, only 28% say they have “quite a lot” or a “great deal” of confidence in them. The states that need unions the most are hostile to them, and the overwhelming majority of Western nations with unions have shed membership. In sum, unions aren’t effective. There should be one union, the federal government. And its first act should be introducing a $25-an-hour minimum wage.
The U.S. economy can support a far larger share of wealth going to lower-income workers. Between 1938 — when Franklin D. Roosevelt signed the first minimum wage into law — and 1968, the federal minimum was regularly increased to account for inflation and productivity. A 2020 study found that if the U.S. had continued to increase the minimum hourly wage in line with inflation and productivity growth, it would have reached $21.50 an hour. Today it would be close to $25.
More than tripling the minimum wage wouldn’t be easy. The shift would need to occur in phases. Some sectors/regions can make reasonable arguments in favor of exemptions. The living wage is also not the same in all regions, so some exceptions would make sense, though we’re an increasingly national economy. The prevalence of chain stores and online platforms with standardized pricing are closing regional gaps.
We need a system where successful CEOs and founders who demonstrate real talent earn enormous pay. And workers at the other end of the spectrum earn a decent living. That’s often not the case. Income inequality has gone berserk. From 1978 to 2023, compensation for top CEOs exploded 1,085%, compared with a 24% rise in the typical worker’s pay. The median pay package for an S&P 500 company leader climbed to more than $16 million in 2023 — almost 200 times the median worker’s wages.
Sue Nabi, CEO of beauty products company Coty, earned an eye-popping $149 million in 2023, while the median worker at the company earned $39,643. Those employees would need to work for 3,769 years to earn what Nabi received in one, according to an analysis last year by the New York Times. Lowe’s, meanwhile, spent $42.6 billion buying back its own shares between 2019 and 2023 — enough to have given each of the company’s 285,000 employees an annual $29,865 bonus for five years, according to the Institute for Policy Studies. While CEO Marvin Ellison received $18.2 million in 2023, the retailer’s median annual worker pay was just $32,626.
Successful independent businesses can’t lead the revolution, but should support it. Not only can many companies increase their labor costs, they should, even if it takes a modest bite out of the earnings of the ownership class. This makes financial and economic sense, while generating reputational benefits, too. Think about companies that carry the Fairtrade stamp guaranteeing farmers and workers receive a minimum price plus a premium payment to invest in improving their quality of life.
Companies are starting to get it. Bank of America has been raising its U.S. minimum hourly wage and pledges to hit $25 this year. CEO Brian Moynihan expects to get “payback” in the form of lower turnover. Globally, L’Oreal, Schneider Electric, and Unilever are among corporations that have committed to provide “living wages.”
Democrats shouldn’t lose sight of the extent to which this issue resonates with vast swaths of the American public. Polling shows the long-debated idea of raising the minimum wage is popular with Republicans and Democrats alike. For Kamala Harris, waiting until two weeks before the election to make a case for boosting the minimum wage to at least $15 an hour felt $10 short and several years late.
Since 2000, corporate after-tax profits have surged roughly sixfold, while wages have only inched higher. An economy that values work below the cost of living is broken. An economy that does so while delivering massive profits to wealthy owners is a moral failure. Inequality is a choice. We have the power to give all Americans an opportunity to earn a wage that allows them to live a life of dignity. What happens next is up to us.
CEOs and entrepreneurs should be bold. Today I’m making a commitment to pay my Prof G contractors and employees at least $50/hour or $100,000 a year in total compensation, respectively. And I’m challenging other CEOs/entrepreneurs to join me. I make a shit-ton of money, and I deserve it. Also, America and the people who work with me deserve great wages. A shit-ton minus half a million dollars each year (the cost for Prof G Media to become a Maximum Wage Firm) is fine. It’s not only the right thing to do, it’s smart business. If I sound like I’m virtue signalling, trust your instincts. And that’s OK.
One of the biggest unlocks in my life has been recognizing that being a man means adding surplus value: creating more tax revenue than I absorb, listening to more complaints than I make, noticing people’s lives, providing more (net) care and love. I have run firms my whole life, and I’ve always aimed to provide the minimum compensation required such that employees won’t leave. No more. BTW, this is how nearly all companies work, optimizing for profits. This is a result of the incentive system in a capitalist society, as it increases the enterprise value (profits) of the firm — and the likelihood the business survives. Our entire society now prays at the altar of shareholder value, prioritizing them over every other stakeholder … dramatically. If you are blessed with a company that’s doing well, why wouldn’t you pay more than you need to? Do you love your kids, community, and country just enough that they don’t abandon you?
One of the most rewarding things about running a firm is it mimics some of the m/paternal feelings of reward you get from protecting and providing for your offspring. I’ve worked hard, I’m talented, and I made the genius decision to be born in America. The result is I’ve got a firm that’s exceptionally profitable. One of the (many) rewards of that is I get to pay people more than I need to. It feels great.
Life is so rich,
Founder, Prof G Media, a Maximum Wage Firm
P.S. Every week I answer your questions on the Prof G Pod Office Hours. This week: generational wealth, dirty jokes, and Reddit. Listen here on Apple or Spotify or binge-watch them at all on YouTube.
P.P.S. Last chance to sign up for Section’s free day of micro-workshops, Become an AI Leader in a Day. Join them next Thursday and walk away with a certification.
The post Project 2028: Wages appeared first on No Mercy / No Malice.
2025-03-21 23:40:23
Pornography is the McDonald’s of sex — fast, convenient, and utterly divorced from nutrition. —Anonymous
I was at Mobile World Congress in Barcelona earlier this month. A young man, married with two kids, who founded a tech firm, approached me and asked if I’d mentor him.
“Boss, you should mentor me. I mentor young men who are struggling, and you are clearly thriving,” I told him.
“I have an addiction,” he said.
“What’s the addiction?”
“Porn.”
As soon as the words left his mouth, I sensed shame — within 15 seconds he couldn’t look me in the eye, and within 60 seconds he’d fled.
All addictions are wrapped in some shame, but not in equal amounts. Tell someone you’re sober from pills or booze, and you’ll get praise and admiration. The same is not true for people with a porn addiction. In the past six months a half-dozen men have told me their drug of choice is porn. I suspect they aren’t outliers, but canaries sounding an alarm from the most opaque sector of the addiction economy.
At the turn of the millennium, there were no social media platforms, there wasn’t enough bandwidth to run video, and Amazon was a bookstore. But online porn dates back to 1995. By 2004 online porn was so ubiquitous that Avenue Q won six Tony Awards, including Best Musical, with a song called — wait for it — “The Internet Is for Porn.” Nobody doubted that claim then, and nobody doubts it now. But how much of today’s internet is porn? A: We’re not sure. Some estimates put porn-related traffic as high as one-third of all internet traffic. Pornhub, the leading distributor of free, ad-supported porn, ranks in the top 20 websites globally; 10 of its competitors rank in the top 100.
Porn addiction isn’t listed in the Diagnostic and Statistical Manual of Mental Disorders. But in a study of 2,000 American adults, 11% of men and 3% of women reported some agreement with the statement “I am addicted to pornography.” Fewer people than report alcohol abuse, but more than admit to a problem with gaming or gambling. On my podcast, Dr. Anna Lembke, a professor of psychiatry at Stanford and the author of Dopamine Nation, said that, beginning in the early 2000s, she saw warning signs in male patients who self-described as “porn addicts,” and cited the internet as the culprit. Since then there’s been an escalation in people presenting with digital addictions. Porn addiction may be difficult to isolate within the broader and more diffuse internet addiction, but compared to other internet-enabled compulsions, there’s relatively little peer-reviewed research. My thesis: Few academics want to be known as The Porn Professor (see above: shame).
Humans came off the savanna hard-wired for addiction. The dopamine rush a hunter felt when taking down a mammoth is neurologically the same feeling a gambler gets when betting. Our instinct to gorge whenever we see food was honed during millenia of scarcity, and it’s that same instinct the food industrial complex leverages to keep people eating long past the point of being satiated. Ours is an addiction economy: The most valuable companies arbitrage the disparity between our instincts and industrial production.
On the internet, everyone has access to everyone, and the digitization of a market results in a winner-take-most ecosystem. Dating apps sort potential partners into a small group of haves and a titanic group of have-nots. On Hinge, the top 10% of men receive 60% of the “likes” — the comparable figure for women is 45%. Online porn exploits the lack of mating opportunities for men. The most recent figures for Aylo, the company behind Pornhub, Brazzers, Redtube, Youporn, and Xtube, showed 2018 revenue of $460 million, with a profit margin of 50%.
Meanwhile, OnlyFans generated $6.6 billion in revenue in 2023. The firm has more than 300 million registered accounts, of which 70% are male. On the other end of that internet connection are 4.1 million creators, 84% of them women. While OnlyFans is known for its subscription model, one-off transactions are driving 88% of the revenue growth. These “tips” are an arbitrage on the disparity between the biological impulse to mate and the lack of mating opportunities; there are fewer economically and emotionally viable men, and too few venues where a man can develop the skills to express romantic interest while making a woman feel safe. Pro tip: Research shows women are attracted to men who signal three primary attributes: resources, intellect, and kindness.
In the VHS and DVD eras, porn consumption was a wealth transfer from men to the adult entertainment industry and mom & pop video store owners. In the OnlyFans era, it’s a wealth transfer from hundreds of millions of men to a handful of platforms and tens of thousands of women. During its peak growth, OnlyFans was adding the population of Atlanta to its registered user base every day.
The average OnlyFans creator grosses roughly $1,800 annually; one analysis found that creators in the top 0.1% collect 100x what those in the top 10% bring in. One OnlyFans earner grossed $43 million in a single year. A common query I receive at speaking gigs is who is most vulnerable to AI? Easy — OnlyFans is ground zero for disruption from AI bots. This is not a good thing, as there will be less friction to becoming less social, less mammalian.
We are what we pay attention to. More research is needed (see above), but one study found that porn consumption explained 9% of the variation in men’s sexual objectification of women. Among men who prefer degrading pornography, the variance increased to 20%. A longitudinal survey of 962 Dutch adolescents found exposure to porn among males was a strong predictor of objectifying attitudes toward females.
We pathologize males attracted to misogynistic communities as incels, potential mass shooters, and sex criminals, but these men are statistical outliers. However, we may be evolving a new species of asocial, asexual male: Homo solo. Homo solo’s inability to develop romantic skills means he’s primarily a danger to himself, as he’s likely to be less happy, earn less money, and die sooner. Homo solo’s AI girlfriend never says no, is never tired, busy, or in a bad mood. In other words, she’s not human, and that obviates the risk of rejection and the other complexities of real-life relationships.
The skills developed, or not, in the pursuit of organic love are key skills that serve men well in a variety of environments for the rest of their lives. We’ve been taught to believe that the menace to society was the fraternity alpha male. It isn’t. Society is being subjected to the sociopathy of a bunch of tech CEOs who, in my view, did not get laid enough as young men.
Most leaders, however, honed skills from mating that have been key to their success. Show me a guy who is competent in a bar, and I’ll show you someone who can be reasonable in a boardroom. Show me a guy who objectifies women, building an app that pits women against one another, based solely on their physical attributes, and I’ll show you Mark Zuckerberg, and an app whose algorithms encourage girls to sexualize themselves and young people to generally feel shittier about themselves.
Sexual desire is fire. Without this fire, our species goes out of business. Unfortunately, we’ve built a fire-retardant generation. Zoomers prefer staying home and scrolling to going out, and when they do venture out they’re less likely to visit a bar, reducing the chances they’ll make a series of bad decisions that might pay off. BTW, I believe the anti-alcohol movement is second only to remote work in the damage it’s doing to young people. The risk to a 25-year-old liver is dwarfed by the social isolation and loneliness epidemic plaguing America’s youth. Think of the most important things in your life: who you decided to have kids with and the friends you still count on. Then ask, did alcohol lubricate the often awkward formation and cementing of those bonds?
Despite the risk to our one and only god, shareholder value, one-third of workers say they’ve had a workplace romance. This is verboten, but it shouldn’t be — work is a great place to find a mate. The rules don’t apply, however, if you’re the founder of a tech firm. (See above: men who didn’t get laid in college.) The culture wars are another fire retardant. Richard Reeves, the president of the American Institute for Boys and Men, recently told Vox that men know what not to do on a date — “don’t mansplain, don’t be toxic, don’t be a predator … don’t be a creep” — but they’re clueless about what to do on a date. We’ve pathologized the pursuit of sex (i.e., dating) and made porn the path of exponentially less resistance.
In news that won’t surprise anyone, dampening the fire that fuels casual sex and dating has coincided with the U.S. birth rate hitting an all-time low; global birth rates are also plummeting. According to Pew, 63% of men under 30 are single, compared with 34% of women (i.e., the women are dating older guys). More than half of single Americans say they’re not currently looking for a relationship or casual dates. Another study found the percentage of sexually inactive men ages 18 to 24 increased from 19% in 2002 to 31% in 2018; the percentage of sexually inactive young women increased from 15% to 19% over the same period.
I graduated (barely) from UCLA with a 2.27 GPA. I did, however, go on campus almost every day. Specifically, I left my fraternity to venture on campus as UCLA in the eighties was like a Cinemax film set in Brentwood. I would hang at North Campus with friends and, to be blunt, hope to meet someone I might (note: “might” is doing a lot of work) have sex and establish a relationship with. If I’d had on-demand porn on my phone and computer, I’m not sure I would have graduated, as I would have lost some of the incentive to venture on campus. I just read the previous sentence, and it sounds crass and shallow — but it’s also accurate. And that’s the rub, so to speak. Porn can reduce your ambition to take risks, become a better person, and build a better life. The best thing in my life is raising two men with a competent, loving partner. The catalyst for me risking humiliation, approaching her at the Raleigh Hotel pool, and introducing myself wasn’t a desire to someday qualify for lower car insurance rates, but the desire / hope to have sex. BTW, our oldest son’s middle name is Raleigh, and I’m taking him on a college tour next week.
The key to success isn’t getting an investor, employer, or woman to say yes, it’s putting yourself in situations where you take risks, get a no … and realize you’re fine, i.e., build resilience. And while it’s great that social norms have helped more women feel comfortable asking men out, the default setting, the expectation continues to be that men make the first move. Among Zoomers, one study found men paid for all or most of a couples’ dates 90% of the time. On first dates, 80% of men expect to pay, and 55% of women expect him to pay. I’ve told my boys that whenever they are in the company of women, they pay. (Can’t wait for the shit on that one.)
I coach a number of young men. It’s unrealistic to tell them to abstain from porn. And there is evidence that porn consumption is fine in moderation. The problem is losing the fire, the sexual desire that inspires you to be a better man: to have a plan for economic viability; to be fit; to demonstrate kindness, intelligence, and a willingness to take risks; to build resilience and develop the ability to express romantic interest while making someone feel safe.
We have companies with infinite resources and command of godlike technology all attempting to convince young men they can have a reasonable facsimile of life on a screen with an algorithm. The most frightening data I’ve seen recently is that 51% of men aged 18 to 24 have never asked a woman out in person. I find this so fucking depressing.
Romantic comedies are two hours, not 15 minutes, for a reason. Relationships and mating are hard … and worth it. We need more venues (national service, third places, freshman seats, the office) where young people can meet. And men need to recognize there’s a profit motive in dampening the flames of desire and motivation to become better men. In sum, as I said on Bill Maher’s show: Young men need to get out of the house, take risks, and demonstrate excellence so they can make their own bad porn.
Life is so rich,
P.S. This week on the Prof G pod, I spoke with Dr. Fiona Hill, a senior fellow at Brookings, chancellor of Durham University, and a former U.S. National Security Council official specializing in Russian and European affairs about the war in Ukraine, the future of U.S.-Russia relations, and the broader geopolitical effects of the conflict. Listen here on Apple, Spotify, or YouTube.
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2025-03-14 23:52:35
The president is pulling back the security blanket that’s protected Europe since 1945 and imposing 25% tariffs on steel and aluminum imports, claiming the European Union was formed to “screw” the United States. As the U.S. upends transatlantic ties, the EU is awakening to the reality that its rich uncle has lost his shit and can no longer be trusted, much less depended on. As dangerous as this is, we should ask “What could go right?” This rift presents an opportunity for the EU to harness its economic strength and finally become a union.
Skepticism is warranted. The bloc of 27 member states has a host of problems: waning competitiveness against the U.S. and China, lagging investment, costly regulation, lack of coordination, sclerotic decision-making, and political division. Only 4 of the world’s top 50 tech companies are European, according to a report last year led by Mario Draghi, the former president of the European Central Bank. Without radical change, Draghi said, Europe’s “reason for being” is at risk.
But with American brand equity eroding at a breathtaking pace, Europe could fill the void. Under Trump, the U.S. is caving to Russia, a murderous autocracy. The pre-orchestrated ambush of a democratically elected leader in Ukraine was a low point in American history. Typical head-up-your-ass thinking from a leader who’s decided to alienate allies, raise costs for American consumers, and reduce demand for our products overseas. The definition of stupid is harming yourself while harming others. These policies are … stupid.
So, how should Europe respond? First, it’s critical the EU significantly boost its spending. EU defense investment last year accounted for just 1.9% of its GDP, well short of the level of 3.5% that’s needed to respond to today’s existential crisis.
Europe is finally getting serious about security. Ursula von der Leyen, president of the European Commission, set out a plan to mobilize €800 billion for defense, including a €150 billion loan program to pay for weapons and technology, while Germany’s chancellor-in-waiting, Friedrich Merz, stressed the need for “independence” from the U.S. Merz’s center-right Christian Democrats and the leaders of his likely coalition partner, the center-left Social Democrats, have agreed to relax limitations on German borrowing and inject hundreds of billions into the country’s military and infrastructure — a seismic shift in policy.
Despite its numerous challenges, Europe has economic heft it can leverage. Europe has a GDP 10 times the size of Russia’s, but Putin is spending 40% more on the war than Ukraine and all its allies, including the U.S., combined.
The next step is seizing more than €200 billion of frozen Russian assets held in Brussels. While the interest generated from those funds is being used to back a $50 billion loan to Ukraine, European countries stopped short of confiscating the funds amid fears that it could breach international law and undermine trust in Europe as a place to invest. The risk to investment in the EU is dwarfed by the importance of setting a clear incentive to think twice before invading a neighbor.
It’s worth noting that about £2.5 billion from the sale of Chelsea Football Club by Russian billionaire Roman Abramovich is just sitting in a bank account amid protracted talks about how the money will be unlocked. It’s time to pull the trigger on the frozen funds. This would move the EU upstream of the policies of the U.S. president, and remove his leverage to force a surrender.
Another positive emerging from the chaos is stronger collaboration between the EU and the U.K. Almost nine years after Britain voted to leave the bloc — one of the biggest self-inflicted injuries in history — the U.K. is moving closer to Europe again. Prime Minister Keir Starmer has proposed forming a “coalition of the willing” to police any ceasefire in Ukraine, with his country ready to “put boots on the ground and planes in the air.” Britain has also shown support for a multilateral fund and joint military financing to fortify Europe’s defenses.
At a time when European countries are already under financial pressure, pouring more money into defense will be painful. In the U.K., Starmer has drawn fire over his plan to cut the foreign aid budget to fund the military. But the prime minister has “found a new purpose abroad” after getting off to a shaky start, as the Economist notes in a cover story this week under the headline “Winston Starmer.”
Putting the moral argument to support Ukraine aside, leaders can make an economic case for military investment, as it paves the way for innovation. Consider the U.S. Defense Advanced Research Projects Agency. The agency, better known as DARPA, played a critical role in breakthroughs including GPS navigation, stealth technology, and mRNA vaccines. In Israel, where technology and national security go hand in hand, the military serves as an incubator of startups. Or look at Ukraine, which has revolutionized drone warfare.
The Trump administration fails to see what may have been the best investment by the U.S. in recent history. The $67 billion the U.S. has provided in military aid to Ukraine is a significant sum, and Americans justifiably question funding a war thousands of miles away when they can’t find jobs or afford diabetes medication. However, much of that spending benefits U.S. military suppliers, creating jobs and stimulating the economy. (As it happens, mostly in red states, but that’s a different post.) What’s more, using the equivalent of about 7% of our defense budget, we’re crippling Russia’s army, hobbling Putin’s economy, and castrating proxies that pose a terrorist threat. All without putting a single American boot on the ground. We’ve taken out a third of an enemy’s kinetic power and sent a message to China regarding its long-contemplated invasion of Taiwan. They’ve no doubt taken notice of how formidable a motivated fighting force can be defending their homeland when armed with Western armaments and intelligence.
The U.S. retreat presents an opportunity for Europe. In Germany, bold plans to step up investment in defense and infrastructure are sparking optimism that the manufacturing sector will get a much-needed boost. Weapons maker Rheinmetall aims to convert some car-part plants to produce military equipment, and Hensoldt, which makes sensors and radars, is considering hiring software engineers from automotive suppliers that have experienced huge job cuts.
Rheinmetall, French warplane maker Dassault Aviation, Italian defense and aerospace company Leonardo, Britain’s BAE Systems, and Sweden’s Saab, a maker of jets, submarines and anti-tank systems, have all seen dramatic rallies in their share prices as investors anticipate an increase in military spending.
The benefits could spill over into other sectors, too, giving a lift to a sluggish European economy. It’s estimated that a debt-financed increase in defense spending to 3.5% of GDP — with those funds directed to infrastructure, R&D, and manufacturing from European sources — could increase economic output by as much as 1.5% per year.
If Europe successfully adapts, it will expand in promising areas including AI, semiconductors, digital infrastructure, and quantum computing. Building on its manufacturing, technology, and intellectual property prowess, it could level up to its global competitors.
Europe has economic influence. But it also needs resolve, a resource in abundance in Russia. Think about what Ukraine and its allies are up against. Putin has shown a willingness to shed a staggering amount of blood, sending waves of young men forward into a “meat grinder,” as the strategy is known, in a bid to overwhelm the enemy. Ukraine estimates Russia lost 150,000 soldiers in 2024 alone — almost three times the number of Americans who died in the Vietnam War. How does Russia recruit? In some regions, through substantial upfront payments.
U.S. Defense Secretary Pete Hegseth plays down the importance of values relative to hard power. “You can’t shoot values. You can’t shoot flags,” he says. He’s wrong. Afghanistan, Vietnam, 1939 Britain, and the 13 American colonies all faced bigger fighting forces. And they prevailed. The EU lacks the funds, but this can be fixed. The real question is: Do they have the resolve?
When my mom was a young girl growing up in London during World War II, she and her family had to endure the Blitz. They were forced to sleep in dark tube stations, where they’d pass out gas masks shaped like Disney characters so scared children would agree to put them on. Eight decades after Germany surrendered, how many Europeans are willing to sleep underground to live through the night?
Achieving peace, security, and stability will require tough decisions and sacrifices. The kind of sacrifices that win wars. Is the EU willing to make them? As Trump advances with his America First agenda, it’s easy for proponents of liberty and democracy to despair. But there’s nothing like the threat of a brutal autocrat in Russia and an unpredictable president in the White House to bring unity to the continent. The bad news is the EU can no longer count on the U.S. The good news: They may not need us.
Life is so rich,
P.S. My Raging Moderates co-host Jessica Tarlov and I will be hosting a live podcast recording at the 92nd Street Y in NYC on April 17. Join us online or in person. Sign up here.
P.P.S. Last call to sign up for my AMA on Thriving in the Age of AI next week. RSVP here.
The post Europe Becomes a Union appeared first on No Mercy / No Malice.
2025-03-08 00:48:14
Democrats need to be the party of ideas, not indignation. Our “Project 2028” series will address critical issues facing American society through a No Mercy / No Malice lens. We begin with housing.
The U.S. doesn’t have a housing crisis, but an affordability crisis. Roughly one-third of Americans rent, and nearly half are “cost-burdened,” i.e., they spend 30% or more of their income on housing. Since 2019, rents have increased 1.5x faster than income in most U.S. metro areas. In purely economic terms, increased housing costs reduce labor mobility and productivity, as workers can’t afford to live in high-growth areas. When human capital can’t be invested in the regions offering the greatest returns, it dampens growth; one research project estimates that removing housing constraints (i.e., lowering costs) to increase the liquidity of human capital would increase GDP by $1.4 trillion. In sum, there may be an economic as well as a social justification for government investments in housing.
Elevated housing costs also take a toll on health, as families who struggle to afford housing often delay medical care, eat less healthy food, and have higher levels of anxiety and depression. But the most catastrophic consequence of unaffordable housing is that 770,000 Americans are homeless. According to one study, communities where the median rent is more than 32% of the median household income are likely to see sharply higher rates of homelessness. But no matter where they live, homeless people suffer intense physical and mental harm, put a disproportionate burden on public services where they live, and reduce the quality of life for all citizens.
The common denominator for struggling renters and the homeless isn’t identity, but money. Increasing support for Section 8 housing and rent control may provide short-term relief, but in the long term these programs become entrenched and suppress development. The quickest way to help poor people afford housing is simple: Pay them more. As I’ve written before, I believe the minimum wage should be $25 per hour. 
There are approximately 32,000 homeless veterans in the U.S. While vets account for only 5% of the total homeless population, housing them is a good place to start, as they’re politically popular and have access to benefits. A federal “No Homeless Vets” pilot program could be a platform for testing solutions. It could also provide what’s missing in American politics right now: Renewed confidence that the government can take on big challenges.
Owning a home marks one’s progression into adulthood, starting a family, and building wealth. But for many Americans, the American dream has become a hallucination. This is especially true for young people; between 1984 and 2024, the age of the typical first-time homebuyer jumped from 29 to 35. Since 1963, home prices have increased 3x, after adjusting for inflation, while the median household income increased about 1.5x. Nationally, the average home price to income ratio is 4.7. It’s significantly higher in California (8.4), Washington (6.3), Massachusetts (6.3), New York (5.7), and Florida (5.7).
Housing experts say we need to build somewhere between 1.7 million and 7.3 million additional housing units. In the same way Ernest Hemingway described the process of going bankrupt, we got here gradually, then suddenly, as the pace of homebuilding has yet to fully rebound to the rate before the Great Recession.
Increased costs for labor, building materials, and regulatory compliance (see below) have all contributed to the problem. The cost of building multifamily housing in California, for example, spiked by 25% between 2010 and 2020. Nationwide, residential construction costs rose 19% over the same period. Construction costs have stabilized since the pandemic: Labor costs grew 3.8% over the past year, while the cost of materials was flat. Mass deportations and tariffs, however, will likely increase the cost of both labor and materials.
Democrats don’t have power over tariffs and immigration, but they can champion cost-effective building. Manufactured homes, which are built in factories and finished on site, are 35% to 73% cheaper than homes built entirely on site. In Los Angeles, many homeowners can’t afford to rebuild after the fires, as quotes for new construction can be 2x or more what insurance will cover. A partnership between a nonprofit and manufactured home startup aims to donate 100 prebuilt homes that cost around $260,000 each. To rebuild L.A. quickly, local leaders should hyperscale this kind of building.
When I interviewed housing economist Jenny Schuetz on my podcast, she told me housing policy is relatively simple, but the politics are hard. Case in point: Around 75% of residential land in the U.S. is zoned exclusively for single-family homes — the most costly and least dense type of housing. Rezoning for multifamily housing and taller buildings would make it easier to build.
At the federal level, the bipartisan Yimby (yes in my backyard) Act encourages block grant recipients to track and remove barriers to housing construction. HUD grants along the lines of Pathways to Removing Obstacles to Housing, which Congress authorized $85 million for in 2023, have helped localities purchase land for affordable housing, streamline the building application process, and add local staff to fast-track affordable-housing proposals. We should double down. Likewise, we should pass the bipartisan Housing Supply and Affordability Act, which would allocate $1.5 billion in technical assistance to overhaul local zoning rules.
Local governments and neighborhoods, however, hold most of the power here. Reform is costly and time-consuming, as new rules must contend with a confusing legislative labyrinth. The effects of an overlawyered process are most apparent in blue states. A significant number of Californians left for Texas in search of jobs and affordable housing — the chocolate and peanut butter of economic growth. To win national elections, Democrats need to demonstrate that they can govern. The winning move: Go hard at zoning reform, cut red tape, and encourage development. Such a pivot could make for strange bedfellows — zoning reform means taking on environmentalists and wealthy homeowners.
The standard property tax model imposes taxes on land and structures. This discourages building, since new construction will be taxed. We should reverse the incentives, and tax only undeveloped land, encouraging development, while cutting taxes on existing homes. The idea has been proposed in Detroit and New York City to reduce the number of vacant lots in those cities. In Pennsylvania, several cities have used a similar split-rate tax that taxes structures at a lower rate than land. One study found that split-rate tax models can increase high-density housing units between 2% and 10%. Embracing the strategy could rebrand Democrats from tax-and-spend liberals into tax-cutting builders.
This week, the California legislature released a report examining the state’s failure to build enough affordable housing. The author’s conclusion: The planning process is slow, crippled by red tape, and vulnerable to frivolous lawsuits, making it “too damn hard to build” in the Golden State. Exhibit A: In 2024 the state’s Supreme Court resolved a three-year battle over a 1,200-unit Berkeley housing project. Neighborhood groups argued that the noise predicted to come from college student housing amounted to a “pollutant” under the law. The neighborhood groups lost, but the case illustrates the larger problem. BTW, UC Berkeley has been there longer than any resident, and the scarcity model weaponized by admissions departments and existing homeowners is morally bankrupt. But that’s another post.
Nimby homeowners have fashioned a state law, the California Environmental Quality Act, into an anti-growth cudgel. A California Legislative Analyst’s Office study found that CEQA litigation delayed construction by two-and-half years. Only 20% of CEQA lawsuits target “greenfields,” i.e. converting open space to housing, while 85% of CEQA lawsuits were filed by groups with no track record of environmental litigation. A California state senator has introduced legislation to fast-track CEQA cases. Lawmakers in states and localities with similar laws should follow suit.
Rents in Minneapolis increased by only 1% between 2017 and 2022, largely because developers increased the housing stock by 12% during the same period. Meanwhile, rents in the rest of Minnesota, which only boosted housing stock by 4%, increased by 14%. The unlock? Minneapolis reformed zoning laws to encourage taller multifamily housing projects and eliminated parking minimums that can cost $50,000 per space. It’s a similar story in Austin, where city officials waged a decade-long political fight to tackle housing affordability through rezoning. Austin’s new rules allow for single-family homes to be built on smaller lots, apartments to be built closer to single-family homes, and denser development along a planned light-rail line.
Nimby homeowners tend to be loud and politically connected, giving the impression that their views represent the broader community. That is not the case. YouGov polling suggests that Americans may be more receptive to local development than previously thought. Support for building more single-family homes polls at 90% nationally, 81% locally. For senior housing, national support polls at 88%, local support is 84%. Nationally, 76% of Americans want more apartments built, while 65% support building more apartments locally. Low-income housing and homeless shelters are the least favored housing types, but even there local support polls at 2 to 1. If you’re a politician, you’ve been given a green light to ignore Nimbys.
Despite the conventional wisdom, people lose money in real estate. Homes are illiquid capital-intensive assets that come with “phantom” costs: Insurance premiums, maintenance bills, and property taxes — all of which are expected to rise due to climate change. Owning also limits diversification, as homes are close to workplaces, meaning a local economic downturn or a natural disaster could wipe out your equity at the same time you lose a job. Historically, the S&P averages a 10% annual return, outpacing housing at 4% to 8%. Moreover, real estate brokers typically charge around a 6% commission — 60x the transaction cost you’d pay for a low-fee ETF that tracks the S&P. The advantage of homeownership is forced savings, as people don’t want to risk the hassle and shame of eviction. Another advantage: Owning can stabilize monthly housing costs relative to rents.
I like real estate, as no other asset class allows you to lever up 5-to-1 with a low downpayment and a deductible interest rate. But the idea that homeownership is the best, or only, way to build wealth is a lie fomented by the National Realtors Association that needs to die. This lie leads to dubious financial advice for the people who buy homes that don’t outperform the market, and it makes those who aren’t able to buy feel like failures. But the most toxic by-product of this lie is that it encourages incumbents to inflate the value of their assets by making housing scarce. Americans want to build wealth, and Democrats should speak in aspirational terms. But if housing is the primary / only vehicle for wealth accumulation, we shouldn’t be surprised that our political fault lines are rich against poor, rural against urban, and old against young.
If economic security is the nutrition of a capitalist society, then maybe we need to stop thinking of housing as an investment, but a consumable (e.g., food, energy, education). The construction of millions of low-cost units for young people, coupled with tax-advantaged incentives to invest in the market would result in a better path to wealth. In addition, we need to remove housing from the growing list of sources of anxiety for young people. It’s housing, not an investment strategy or the arbiter of whether you’re worthy enough to mate, start a family, or earn status. Economic security and deep and meaningful relationships are the American Dream, not a mortgage payment. The call sign for the next administration should morph from “Drill Baby Drill” to “Build Baby Build.”
Life is so rich,
P.S. This week on Prof G Markets, Ed and I discussed EU defence stocks, the latest tariffs, and crypto, plus we had a conversation with Jonathan Kanter, former assistant attorney general for the Antitrust Division of the U.S. Department of Justice. Listen here on Apple, Spotify, or YouTube
P.P.S. Join me for an AMA on Thriving in the Age of AI on March 20. RSVP for free here.
The post Project 2028: Housing appeared first on No Mercy / No Malice.
2025-02-28 23:46:57
The most important decision we make is who we partner with, who we marry. However, for many, marriage isn’t an essential life choice … it’s a luxury item. I asked my friend, the social scientist Richard Reeves, to pen a post on the subject.
A dramatic reversal has taken place on college campuses. Once male-dominated, they are now populated largely by women. In the early 1970s, about 3 in 5 students were men; now it is the other way around. There are 2.5 million fewer male than female undergraduates. There’s an even bigger gender gap in master’s degrees.
Does this matter? After all, the massive educational advance of women and girls is rightly seen as a cause for celebration rather than lamentation. Given that men still out-earn women, there’s an argument to be made that women need to out-learn men just to keep up in the labor market.
I think it does matter. For one thing, it highlights how the K-12 educational system fails boys. Kudos to those governors, like Wes Moore in Maryland, Spencer Cox in Utah, and Gretchen Whitmer in Michigan who have noticed. Even when men do enroll in college, they’re much less likely to get a degree. Too much male talent is being left on the table. This is why 30 or so institutions have already joined a new initiative I’m helping lead, the Higher Education Male Achievement Collaborative.
But there is one thing we can stop worrying about: that the college gender gap is reducing marriage rates. This is a common concern, and for good reason. There is pretty strong evidence for what anthropologists call female hypergamy, which is a fancy way of saying that women typically want to marry men of at least equal, or preferably higher, status. The fear is that, with so many more college-educated women than men, marriage rates will plummet.
I’ve always been skeptical of this argument. For one thing, women overtook men in higher education back in the 1980s. So if marriage rates among women with a college degree were going to fall, they’d have done so by now, and they haven’t. There is also some evidence from European countries that hypergamy declines as gender equality increases.
Because this is an empirical question, I commissioned an empirical study. The resulting paper, by Clara Chambers, Benjamin Goldman, and Joseph Winkelmann, uses data from Opportunity Insights, a team of researchers and policy analysts at Harvard led by economist Raj Chetty.
Marriage rates among college-educated women have been rock-steady at around 70% for decades, at least since World War II. The decline in marriage rates has been among women without a B.A. As a result, a huge class gap in marriage has opened up. As the authors of the study write for AIBM:
“The stable marriage outcomes for college-educated women sharply contrast with the significant decline in marriage rates among women without a B.A. over the past half-century. Among women born in 1930, there was no education gap in marriage rates. Since then, a nearly 20 percentage point gap has emerged, with college-educated women now significantly more likely to marry.”
The simple math here means that some women with college degrees must be marrying men without college degrees. That is exactly what the paper finds. One in five college-educated women marry a man without a four-year degree. What’s more surprising is that this was always the case, long before the great educational overtaking. College-educated women born in 1950 were as likely as those born in 1980 to marry a man without a degree.
Women with college degrees continue to marry at high rates, in part because of the continued willingness, among one-fifth of them, to “marry down” in terms of education. This suggests that a combination of female hypergamy and a growing gender gap in education is not having a negative impact on marriage rates. Of course, there are still many unanswered questions. Maybe some of the 30% of those women with a B.A. but no wedding ring would be more inclined to marry if there were more college-educated men around. The stability of the marriage trend suggests not, however. It looks like they just don’t want to marry, period.
In the most interesting couples from a cultural perspective, the wife has more education than the husband. At first glance, that bucks the whole idea of hypergamy. But of course, education is only one marker of marriageability and status. It turns out that money matters a lot, too. Men who have a college-educated wife, even though they don’t have a B.A. themselves — in other words, men who’ve “married up” in educational terms — make a lot more money than other guys with similar levels of education.
Among those born in 1980, guys who married up make $68,000 a year, compared to the $46,000 a year earned by men who either married a woman without a degree or didn’t marry at all.
The earnings premium among men who marry up educationally has gotten bigger over time. This shows that women with a degree are willing to marry men without one — so long as they’re making decent money. Women might “marry down” in terms of education, but not in terms of earnings.
The good news here is that economically viable men have decent marriage prospects and that women with degrees can find a good man. The bad news is that men doing badly in the labor market are likely to struggle in the marriage market, too.
The paper finds that, in areas where working-class men are doing better, marriage rates go up, cutting the marital class gap in half. Making men more “economically viable,” to use one of Scott’s favorite terms, turns out to be key to improving marital prospects.
There’s a corrosive downward spiral at work right now. As the economic prospects of men without a college degree decline, marriage rates fall. That leaves millions more men and women without a partner to share the responsibilities and benefits of family life. In other work by AIBM, we show that half of men without a college degree aged 30 to 50 now live in a household without children.
Without the positive pressures that come from being a father and husband, men are even less likely to really go for it on the work front. They are more likely to be unemployed. They become more vulnerable to addiction, more socially isolated. All of which makes them less attractive as potential spouses. Boys raised in single-mother households then struggle in school and in life, and they have difficulty finding a mate and forming a family, too. And so the cycle turns. The economic struggles of boys and men become entrenched across generations.
It’s not often enough stressed that the class gap in marriage is not only a consequence of economic inequality, but also a cause of it. Pooling incomes into a single household is obviously optimal, from an economic perspective, especially for those with the lowest incomes — who are now the least likely to marry. Some scholars suggest that the class gap in marriage can explain much of the decline in social mobility in recent decades.
Concerns about marriage should then be focused on men and women with less educational attainment and/or worsening economic outcomes. The problem is not that your daughter graduating from Amherst or Berkeley won’t find a man good enough for her. The problem is that a woman in Appalachia or the Bronx won’t find a man she sees as worth marrying.
The best pro-marriage, anti-poverty strategy is simple: improve the economic prospects of working-class and lower-income men.
Simple does not mean easy, of course. Massive investments in education and training are required, as well as more spending on infrastructure, place-based policies to help the poorest counties, and much more besides.
But it’s clear where to start: with the boys and men.
—Richard
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P.P.S. Have a question for Scott on Thriving in the Age of AI? He’s hosting a free AMA on March 20–RSVP now.
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