5 ms·

I think 102% in taxes is definitely not reasonable...

by sedeki 9y ago

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.
        arethuza 9y ago
        Well, wealthy people have have, by definition, more assets that need protection by state provided legal, police and security services - so I would say it is debatable that rich people need the state less.
        charlesdm 9y ago
        Probably. Which is why they pay more (in money terms, but not always in percentage points).
        logfromblammo 9y ago
        The idea that rich people don't like to pay excessively high taxes, and will avoid doing so if they are able, is not a particularly compelling argument against progressive taxation. I am not proposing that any nation institute a 50% marginal tax rate. I am just saying that I believe that any nation that tries to go higher than that is guaranteed to have tax avoidance schemes that ensure no one ever actually pays that much, whether those schemes are visible to the taxing authority or not. Some people will jump through a maze of hoops just to avoid a 0.1% tax. What I'm saying is that nobody would rationally submit to a scheme wherein they do all the work and someone else reaps the majority of the benefits from it. It goes beyond the limits of the human sense of fairness. A 102% marginal tax rate is so far beyond that, I cannot even imagine circumstances that might lead to anyone actually paying it.
- deleted 9y ago
  [deleted]
- beefield 9y ago
  Weirdly enough, US has had a significant time period with top marginal rates exceeding 90%. Interestingly, GDP growth rates during that time have not been repeated since. https://en.m.wikipedia.org/wiki/Income_tax_in_the_United_States#History_of_top_rates https://en.m.wikipedia.org/wiki/Income_tax_in_the_United_Sta... http://ablog.typepad.com/.a/6a00e554717cc988330147e220e3f9970b-pi http://ablog.typepad.com/.a/6a00e554717cc988330147e220e3f997...
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.

I think 102% in taxes is definitely not reasonable...

by sedeki 9y ago

I think 102% in taxes is definitely not reasonable...

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.
        arethuza 9y ago
        Well, wealthy people have have, by definition, more assets that need protection by state provided legal, police and security services - so I would say it is debatable that rich people need the state less.
        charlesdm 9y ago
        Probably. Which is why they pay more (in money terms, but not always in percentage points).
        logfromblammo 9y ago
        The idea that rich people don't like to pay excessively high taxes, and will avoid doing so if they are able, is not a particularly compelling argument against progressive taxation. I am not proposing that any nation institute a 50% marginal tax rate. I am just saying that I believe that any nation that tries to go higher than that is guaranteed to have tax avoidance schemes that ensure no one ever actually pays that much, whether those schemes are visible to the taxing authority or not. Some people will jump through a maze of hoops just to avoid a 0.1% tax. What I'm saying is that nobody would rationally submit to a scheme wherein they do all the work and someone else reaps the majority of the benefits from it. It goes beyond the limits of the human sense of fairness. A 102% marginal tax rate is so far beyond that, I cannot even imagine circumstances that might lead to anyone actually paying it.
deleted 9y ago
[deleted]
beefield 9y ago
Weirdly enough, US has had a significant time period with top marginal rates exceeding 90%. Interestingly, GDP growth rates during that time have not been repeated since. https://en.m.wikipedia.org/wiki/Income_tax_in_the_United_States#History_of_top_rates https://en.m.wikipedia.org/wiki/Income_tax_in_the_United_Sta... http://ablog.typepad.com/.a/6a00e554717cc988330147e220e3f9970b-pi http://ablog.typepad.com/.a/6a00e554717cc988330147e220e3f997...

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.