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The issue isn't "wealth" as much as it's "more wealth". There's a classic example of a secretary who did her job really well so she got a raise only to find it
by SamAtt 17y ago
The issue isn't "wealth" as much as it's "more wealth". There's a classic example of a secretary who did her job really well so she got a raise only to find it bumped her into a higher tax bracket and she actually made less money. So from that point on Secretaries didn't bother to excel.
This applies equally to the engineer who makes $225,000 and who might be willing to put in extra effort but won't if the reward isn't worth it.
So the issue is shifting the cost/benefit equation over to where there isn't enough benefit for people to put in the effort
- encoderer 17y agoThat story about the secretary? That is completely contrary to the way a marginal income tax actually works. There is no way, in the American progressive tax system, to get a raise, be moved into a higher tax bracket, and end up taking home less money. It's just not possible. @ryanwaggoner - correct, ty.
- ryanwaggoner 17y agoActually, it's contrary to the way a marginal income tax works.
- SamAtt 17y agoIt can if you combine a marginal Federal Tax with a State Flat Tax. Not all tax systems are progressive
- encoderer 17y agoOk, I'll bite... How? A state flat tax will tax this new raise at the same flat rate as all the existing pay. The marginal federal tax will tax the new raise, in your scenario, at the new, higher tax bracket. But your scenario would have the gov't taxing this new cash into the red, reducing her take home pay. That's not gonna happen. Period.
- rbranson 17y agoThis is asinine. Not only will the secretary make more money, but this money will likely be purely discretionary. Her post-tax $80 per week increase isn't immediately going to her rent, utilities, bills, etc, it's going to be extra spending money.