6 ms·

Scandinavian countries have one of the most progressive (meaning, increasing with total assets) tax scales in the world. Astrid Lindgren, who you might now as

Scandinavian countries have one of the most progressive (meaning, increasing with total assets) tax scales in the world. Astrid Lindgren, who you might now as the author of Karlsson-on-the-Roof and Pippi Longstocking children books, once was unlucky enough that she had to pay 102% of her income in taxes (yes, paying more than she had earned this year). Things got better since then, but I would totally understand the desire to evade arbitrarily-imposed taxes.

gph 9y ago
>arbitrarily-imposed taxes Isn't a progressive tax system basically the opposite of an arbitrarily defined system? Perhaps you can quibble over where each progressive quantile is delineated, but a system defined by raising taxes on those who make the most is not an arbitrary one. In fact it's a system based on determined reason. Just because you disagree doesn't make it arbitrary.
- sedeki 9y ago
  I think 102% in taxes is definitely not reasonable...
  - logfromblammo 9y ago
    That would be a marginal tax rate. Such would establish an income level above which it becomes more desirable to reduce one's taxable income rather than pursue additional income. Every additional euro would go to the state, plus a 2% fee for having the audacity to earn more money when you already earn too much. Assuming there is a deduction for charitable contributions, that's when you direct your accountant to dump any unexpected windfalls into your favorite charity, so that you save that 2%. Or, more cynically, you might direct your company to reduce its dividend and spend some extra money on an executive retreat. I can see how a 102% marginal rate might seem reasonable to an insane person. But I think the highest marginal rate you can charge without causing unexpected bizarre avoidance behaviors [that may spill over onto other people] is probably 50%.
    - charlesdm 9y ago
      I'm a sane person, and 50% still seems pretty crazy to me. Make a million, lose half. Then there's 10-20% sales tax on everything you buy. The only thing that can be said in those cases: time to move.
      - 1986 9y ago
        But with 50% as the highest marginal rate, you don't lose half if you make a million. You lose half of everything earned above $xxxK, as set by the tax authority.
        charlesdm 9y ago
        Yes, I am aware how a progressive tax system works. In most countries the threshold for the top rate is ridiculously low however, e.g. between €50-100k. So to correct my statement: make a million, pay 35% (averaged out over different tax rates) on the first €XX.000, and then lose half of the remaining €XXX,000. Is that supposed to make it better?
        arethuza 9y ago
        Most people who make a few million probably do it as a capital gain rather than income - so different tax rules will apply. e.g. Higher rate income tax in the UK is 40% for income over £45K (to £150K). However with capital gains tax with things like taper relief you can end up paying 10%.
        charlesdm 9y ago
        Yes, for people building / buying / selling assets (e.g. entrepreneurs and investors) this generally applies. But your average doctor won't be booking capital gains on his (earned) income any time soon. Just pointing out that having income taxes that are too high is often counterproductive for society, just because they can easily be avoided by the wealthy. I guess the differentiation (and justification) is mostly a way to make sure the masses who actually use the infrastructure pay more than the one wealthy person who uses it, but don't need it as much.
  - zanny 9y ago
    102% is a wealth tax. If your state gets to the point where wealth is so concentrated it is crippling your economy catastrophically, it might require the extreme measure of taxing so much you take wealth from the rich to fund whatever recovery measures you are taking. It is an exceptional situation, but its also a possibility. Greater-than-income taxes aren't simply unreasonable.
    - charlesdm 9y ago
      "It might require the extreme measure of taxing so much you take wealth from the rich to fund whatever recovery measures you are taking." Punishing capitalists for creating wealth is just stupid. Let's say you live in country X, and country X does this. Generally there are sufficient ways for wealthy people to avoid being taxed at 102%. However, in the case where they would in fact have to pay such ridiculous tax rates, they would either: 1) stop working and investing and just live off of their capital, to be exempt from the tax (not great for the local economy + because what's the point / why would I risk my money?); or 2) leave (even worse). Personally I'm not a believer in that wealthy people will easily relocate when taxes are raised, but in this case, I do believe they would. There's a certain cutoff point where it just gets unacceptable and it becomes a no brainer.
      - clort 9y ago
        I think you underestimate the motivation of successful capitalists. None of the self made wealthy people I know would have be able to stop working, they are driven to make money before anything else. Contrast to myself, who certainly knows how to relax I've never made any money at all and the time I lucked into some, I took years off and spent it.
        charlesdm 9y ago
        I agree they would not. But with a 102% tax rate, the only way for you to make (more) money would be to relocate somewhere else.
        9y ago
  - anigbrowl 9y ago
    It is if you were underpaying in a previous year. Lifting data points out of context is rarely informative.
- atemerev 9y ago
  And what is the reason for that? People who make more will pay more even with flat tax rate — such is the nature of linear functions. Progressive tax rates, on the other hand, are completely not rational — they are rooted in contempt ("they earn so much, why can't they pay a little more than low-earners?"), which leads to perceived (if not actual) unfairness and enables evasion.
  - vkou 9y ago
    Progressive tax rates are rooted on the indisputable fact that the marginal value of a dollar for someone in the lower 25% of incomes, is much lower then the marginal value of a dollar for someone in the upper 1% of incomes. People also don't evade taxes because they feel personally slighted. People evade taxes because the ROI on doing so is positive. Because they can, and because they won't go to jail for it.
    - dpark 9y ago
      > the marginal value of a dollar for someone in the lower 25% of incomes, is much lower then the marginal value of a dollar for someone in the upper 1% of incomes. Did you say that backwards? The value of a dollar to someone in poverty is much higher than the value of a dollar to Bill Gates.
    - ryanwaggoner 9y ago
      No, the post-hoc justification is sometimes anchored to the concept of marginal utility to the individual by people who want more progressive taxes. You rob banks because that's where the money is, not because you feel like the bank can more easily handle the loss.
      - caf 9y ago
        In this case though, it's not where the money is. Raising the bottom marginal rates produces far more additional tax revenue that raising the top ones.
  - Mvandenbergh 9y ago
iaskwhy 9y ago
This is hard to believe but it is true[0]. [0] https://en.wikipedia.org/wiki/Pomperipossa_in_Monismania https://en.wikipedia.org/wiki/Pomperipossa_in_Monismania
- jacquesm 9y ago
  That lady wielded a very sharp pen.
- BoiledCabbage 9y ago
  No It's not true that she paid more than she earned. Her marginal tax rate was 102%, this is extremely different than her effective tax rate being 102%. It's still an incredibly high marginal rate, but is nowhere near as crazy as the implied 102% effective tax rate.
  - iaskwhy 9y ago
    Thanks for explaining it, I'm not able to edit my previous comment but I stand corrected.
hrydgard 9y ago
To be accurate, it was the marginal tax rate that ended up 102%, not the total tax rate. Still, of course, that was completely preposterous and the current system is very different, though still high-tax in international comparisons.
- atemerev 9y ago
  It still does mean that she had to pay more than she earned (and so did I, one year — long story). If you call someone part of the payment "tax", and some other "social security payments" or "healthcare pool contributions", it still doesn't change the equation. The difference is purely syntactic.
  - StavrosK 9y ago
    That's happening right now in Greece: A company that makes 100k Euro in its first year will pay 110k in taxes, as every company and sole trader is required to pre-pay next year's tax every year.
    - Cyph0n 9y ago
      That's crazy. So are small businesses expected to take out a loan to pre-pay taxes?
      - StavrosK 9y ago
        I guess they're expected to go bust, really. Who knows, the small (and large, really) business sector is completely ruined, the market has been crippled by these tax changes. The tax code gets a large overhaul every year, which instills great uncertainty to anyone thinking of starting a business, and many taxes are retroactive. For example, I've had to pay taxes for funds that were formed in 2016, but the tax starts in 2013, which means that if you completely paid all your taxes for 2015, in 2016 you suddenly owe three years of a tax that was voted in just that year.
  - dkural 9y ago
    While I agree that 102% marginal rate is ridiculous, you are incorrect, she didn't have to pay more than her total income.

gph 9y ago

>arbitrarily-imposed taxes Isn't a progressive tax system basically the opposite of an arbitrarily defined system? Perhaps you can quibble over where each progressive quantile is delineated, but a system defined by raising taxes on those who make the most is not an arbitrary one. In fact it's a system based on determined reason. Just because you disagree doesn't make it arbitrary.

sedeki 9y ago
I think 102% in taxes is definitely not reasonable...
- logfromblammo 9y ago
  That would be a marginal tax rate. Such would establish an income level above which it becomes more desirable to reduce one's taxable income rather than pursue additional income. Every additional euro would go to the state, plus a 2% fee for having the audacity to earn more money when you already earn too much. Assuming there is a deduction for charitable contributions, that's when you direct your accountant to dump any unexpected windfalls into your favorite charity, so that you save that 2%. Or, more cynically, you might direct your company to reduce its dividend and spend some extra money on an executive retreat. I can see how a 102% marginal rate might seem reasonable to an insane person. But I think the highest marginal rate you can charge without causing unexpected bizarre avoidance behaviors [that may spill over onto other people] is probably 50%.
  - charlesdm 9y ago
    I'm a sane person, and 50% still seems pretty crazy to me. Make a million, lose half. Then there's 10-20% sales tax on everything you buy. The only thing that can be said in those cases: time to move.
    - 1986 9y ago
      But with 50% as the highest marginal rate, you don't lose half if you make a million. You lose half of everything earned above $xxxK, as set by the tax authority.
      - charlesdm 9y ago
        Yes, I am aware how a progressive tax system works. In most countries the threshold for the top rate is ridiculously low however, e.g. between €50-100k. So to correct my statement: make a million, pay 35% (averaged out over different tax rates) on the first €XX.000, and then lose half of the remaining €XXX,000. Is that supposed to make it better?
        arethuza 9y ago
        Most people who make a few million probably do it as a capital gain rather than income - so different tax rules will apply. e.g. Higher rate income tax in the UK is 40% for income over £45K (to £150K). However with capital gains tax with things like taper relief you can end up paying 10%.
        charlesdm 9y ago
        Yes, for people building / buying / selling assets (e.g. entrepreneurs and investors) this generally applies. But your average doctor won't be booking capital gains on his (earned) income any time soon. Just pointing out that having income taxes that are too high is often counterproductive for society, just because they can easily be avoided by the wealthy. I guess the differentiation (and justification) is mostly a way to make sure the masses who actually use the infrastructure pay more than the one wealthy person who uses it, but don't need it as much.
- zanny 9y ago
  102% is a wealth tax. If your state gets to the point where wealth is so concentrated it is crippling your economy catastrophically, it might require the extreme measure of taxing so much you take wealth from the rich to fund whatever recovery measures you are taking. It is an exceptional situation, but its also a possibility. Greater-than-income taxes aren't simply unreasonable.
  - charlesdm 9y ago
    "It might require the extreme measure of taxing so much you take wealth from the rich to fund whatever recovery measures you are taking." Punishing capitalists for creating wealth is just stupid. Let's say you live in country X, and country X does this. Generally there are sufficient ways for wealthy people to avoid being taxed at 102%. However, in the case where they would in fact have to pay such ridiculous tax rates, they would either: 1) stop working and investing and just live off of their capital, to be exempt from the tax (not great for the local economy + because what's the point / why would I risk my money?); or 2) leave (even worse). Personally I'm not a believer in that wealthy people will easily relocate when taxes are raised, but in this case, I do believe they would. There's a certain cutoff point where it just gets unacceptable and it becomes a no brainer.
    - clort 9y ago
      I think you underestimate the motivation of successful capitalists. None of the self made wealthy people I know would have be able to stop working, they are driven to make money before anything else. Contrast to myself, who certainly knows how to relax I've never made any money at all and the time I lucked into some, I took years off and spent it.
      - charlesdm 9y ago
        I agree they would not. But with a 102% tax rate, the only way for you to make (more) money would be to relocate somewhere else.
        9y ago
- anigbrowl 9y ago
  It is if you were underpaying in a previous year. Lifting data points out of context is rarely informative.
atemerev 9y ago
And what is the reason for that? People who make more will pay more even with flat tax rate — such is the nature of linear functions. Progressive tax rates, on the other hand, are completely not rational — they are rooted in contempt ("they earn so much, why can't they pay a little more than low-earners?"), which leads to perceived (if not actual) unfairness and enables evasion.
- vkou 9y ago
  Progressive tax rates are rooted on the indisputable fact that the marginal value of a dollar for someone in the lower 25% of incomes, is much lower then the marginal value of a dollar for someone in the upper 1% of incomes. People also don't evade taxes because they feel personally slighted. People evade taxes because the ROI on doing so is positive. Because they can, and because they won't go to jail for it.
  - dpark 9y ago
    > the marginal value of a dollar for someone in the lower 25% of incomes, is much lower then the marginal value of a dollar for someone in the upper 1% of incomes. Did you say that backwards? The value of a dollar to someone in poverty is much higher than the value of a dollar to Bill Gates.
  - ryanwaggoner 9y ago
    No, the post-hoc justification is sometimes anchored to the concept of marginal utility to the individual by people who want more progressive taxes. You rob banks because that's where the money is, not because you feel like the bank can more easily handle the loss.
    - caf 9y ago
      In this case though, it's not where the money is. Raising the bottom marginal rates produces far more additional tax revenue that raising the top ones.
- Mvandenbergh 9y ago

iaskwhy 9y ago

This is hard to believe but it is true[0]. [0] https://en.wikipedia.org/wiki/Pomperipossa_in_Monismania https://en.wikipedia.org/wiki/Pomperipossa_in_Monismania

jacquesm 9y ago
That lady wielded a very sharp pen.
BoiledCabbage 9y ago
No It's not true that she paid more than she earned. Her marginal tax rate was 102%, this is extremely different than her effective tax rate being 102%. It's still an incredibly high marginal rate, but is nowhere near as crazy as the implied 102% effective tax rate.
- iaskwhy 9y ago
  Thanks for explaining it, I'm not able to edit my previous comment but I stand corrected.

hrydgard 9y ago

To be accurate, it was the marginal tax rate that ended up 102%, not the total tax rate. Still, of course, that was completely preposterous and the current system is very different, though still high-tax in international comparisons.

atemerev 9y ago
It still does mean that she had to pay more than she earned (and so did I, one year — long story). If you call someone part of the payment "tax", and some other "social security payments" or "healthcare pool contributions", it still doesn't change the equation. The difference is purely syntactic.
- StavrosK 9y ago
  That's happening right now in Greece: A company that makes 100k Euro in its first year will pay 110k in taxes, as every company and sole trader is required to pre-pay next year's tax every year.
  - Cyph0n 9y ago
    That's crazy. So are small businesses expected to take out a loan to pre-pay taxes?
    - StavrosK 9y ago
      I guess they're expected to go bust, really. Who knows, the small (and large, really) business sector is completely ruined, the market has been crippled by these tax changes. The tax code gets a large overhaul every year, which instills great uncertainty to anyone thinking of starting a business, and many taxes are retroactive. For example, I've had to pay taxes for funds that were formed in 2016, but the tax starts in 2013, which means that if you completely paid all your taxes for 2015, in 2016 you suddenly owe three years of a tax that was voted in just that year.
- dkural 9y ago
  While I agree that 102% marginal rate is ridiculous, you are incorrect, she didn't have to pay more than her total income.