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Neither would $100M or $200M. And for someone making $50,000, paying a 50% effective rate sounds like a great deal compared to living in Bangladesh. I don't thi

Neither would $100M or $200M. And for someone making $50,000, paying a 50% effective rate sounds like a great deal compared to living in Bangladesh. I don't think that argument implies anything about what rates should be, which makes me wonder exactly what it's supposed to demonstrate.

rayiner 11y ago
Presumably, it's "fair" to tax people somehow proportionally to the amount of benefit they derive from living in the U.S. with its government. If someone would make $10 million were they born in Bangladesh, but make $100 million having been born in the U.S, that excess $90 million is a benefit they derive from the U.S. and it's fair to tax them up to $89 million of that. They're still $1 million better off than the baseline. Now, that's the limit of what's morally "fair." What's "optimal," taking into account competing developed countries, may be a lot lower. But taxing up to that limit is "fair."
- lifeisstillgood 11y ago
  That's a really good argument - and emphasises the value of living in one country over another - very reminiscent of city state style arbitrage. I feel there is another "fair" - that of paying the same percentage of income or wealth as everyone else. This is easier to explain and appeals to a more monkey brain part of us. As an example (from the cbsnews link) While the tax rate on dividends has since jumped to 20 percent for people earning more than $400,000 annually, that's still far below the tax imposed on wages for America's highest earners. 20 percent on dividends !? That can't be right ? In the UK we get the same rate as all other income (40 rising to 45). Can I move ?
  - twoodfin 11y ago
    Does your boss ever say to you: "We're having a really bad year. Instead of paying you $50,000, I'm going to have to pull $50,000 out of your savings account"? That's the difference between taxes on investments and on income. Investors are risking loss in a way that workers are not: If your boss stops paying you, you stop working.
    - rayiner 11y ago
      I don't see how the risk is relevant. If you lose $50,000 as an investor, you can carry that forward as a loss to offset future gains.
  - malyk 11y ago
    But society provides an unfair distribution of the benefits of society. A black male born in west Oakland doesn't receive nearly the societal benefit as a white male born to a family a couple miles away in Peidmont. So why should we tax the first guy at the same percentage of the second when the second is receiving extremely more than the first?
- twoodfin 11y ago
  What's special about Bangladesh when defining "fair"? Do you mean it as a proxy for somewhere with no significant government benefits or services? And since Bangladesh's median per capita income is something like $600, it implies that tax rates capturing all but $600 of the median U.S. worker's $51,000 would be "morally fair". 98.8% effective rates! I don't think a definition so constructed has any significant value.
  - rayiner 11y ago
    I use Bangladesh as an example because my family is from there--I can easily estimate the difference between what I make having grown up a citizen of the U.S. versus what my similarly-situated cousins make. But more generally, it's an example of a country that provides internal security, but not much beyond that. It you're starting a business in Bangladesh, you can't take advantage of governmental and social capital: educated workers, wealthy customers, research institutions, etc. The morally fair tax rate is more like 85%--the median U.S. individual income is around $30,000, while the median PPP-adjusted Bangladeshi income is $3,300. But yeah, that's absolutely fair. Just the simple fact of being born in the United States, keeping everything else equal, gives you a huge advantage in wealth.

rayiner 11y ago

Presumably, it's "fair" to tax people somehow proportionally to the amount of benefit they derive from living in the U.S. with its government. If someone would make $10 million were they born in Bangladesh, but make $100 million having been born in the U.S, that excess $90 million is a benefit they derive from the U.S. and it's fair to tax them up to $89 million of that. They're still $1 million better off than the baseline. Now, that's the limit of what's morally "fair." What's "optimal," taking into account competing developed countries, may be a lot lower. But taxing up to that limit is "fair."

lifeisstillgood 11y ago
That's a really good argument - and emphasises the value of living in one country over another - very reminiscent of city state style arbitrage. I feel there is another "fair" - that of paying the same percentage of income or wealth as everyone else. This is easier to explain and appeals to a more monkey brain part of us. As an example (from the cbsnews link) While the tax rate on dividends has since jumped to 20 percent for people earning more than $400,000 annually, that's still far below the tax imposed on wages for America's highest earners. 20 percent on dividends !? That can't be right ? In the UK we get the same rate as all other income (40 rising to 45). Can I move ?
- twoodfin 11y ago
  Does your boss ever say to you: "We're having a really bad year. Instead of paying you $50,000, I'm going to have to pull $50,000 out of your savings account"? That's the difference between taxes on investments and on income. Investors are risking loss in a way that workers are not: If your boss stops paying you, you stop working.
  - rayiner 11y ago
    I don't see how the risk is relevant. If you lose $50,000 as an investor, you can carry that forward as a loss to offset future gains.
- malyk 11y ago
  But society provides an unfair distribution of the benefits of society. A black male born in west Oakland doesn't receive nearly the societal benefit as a white male born to a family a couple miles away in Peidmont. So why should we tax the first guy at the same percentage of the second when the second is receiving extremely more than the first?
twoodfin 11y ago
What's special about Bangladesh when defining "fair"? Do you mean it as a proxy for somewhere with no significant government benefits or services? And since Bangladesh's median per capita income is something like $600, it implies that tax rates capturing all but $600 of the median U.S. worker's $51,000 would be "morally fair". 98.8% effective rates! I don't think a definition so constructed has any significant value.
- rayiner 11y ago
  I use Bangladesh as an example because my family is from there--I can easily estimate the difference between what I make having grown up a citizen of the U.S. versus what my similarly-situated cousins make. But more generally, it's an example of a country that provides internal security, but not much beyond that. It you're starting a business in Bangladesh, you can't take advantage of governmental and social capital: educated workers, wealthy customers, research institutions, etc. The morally fair tax rate is more like 85%--the median U.S. individual income is around $30,000, while the median PPP-adjusted Bangladeshi income is $3,300. But yeah, that's absolutely fair. Just the simple fact of being born in the United States, keeping everything else equal, gives you a huge advantage in wealth.