4 ms·

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 authorit

by 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.

by 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.