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>Tax rates need to more reasonable to encourage the rich to pay them without question. How does this not lead us to a race-to-the-bottom? If any reasonable per

>Tax rates need to more reasonable to encourage the rich to pay them without question. How does this not lead us to a race-to-the-bottom? If any reasonable person had the discretion, they'd pay as little tax as possible. Many of the "wealthiest" Americans play the "Declare Declining Real-Estate Value as a Loss" game to avoid paying tax altogether. [1] There is no lower limit that people will simply pay without question. You can always frame even a minuscule percentage-based tax as a problem given a large enough income by looking at the absolute values paid. That this is given as a rationale for lowering tax is pure propaganda. 1. https://www.thenation.com/article/without-the-amt-donald-trumps-2005-tax-rate-would-have-been-just-3-percent/ https://www.thenation.com/article/without-the-amt-donald-tru...

njarboe 9y ago
There are studies (ref?) that around 10% people start thinking seriously about avoidance. Western historical religious tithing is at this level. State sales taxes rarely go above this level. When you go higher the tax is generally somewhat hidden from the person in the form of withholding the tax by the employer or included it the price and collecting at every level of production, not just at the end sale, as with a VAT.
cjlars 9y ago
If you have a a 50% tax rate and can cut 10% off your tax bill with fancy accounting, your after tax income rises 10% to 55% of earnings. If you have a 10% tax rate and can cut 10% off your tax bill with fancy accounting, your after tax bill rises just over 1% to 91% of earnings. Decisions are made at the margin -- How much effort does it take to keep the extra cash and how much do you get to keep? high rates make tax evasion, legal or not, more worthwhile.
- omegaworks 9y ago
  Then it's a plain cost-benefit analysis. What you're missing are the three factors at play in cost: 1. The tax rate itself 2. The cost of avoiding it 3. The cost of getting caught We have control of 1 and 3 not just 1, and we can exert influence on 2. The double-Irish hole is closing.
  - cjlars 9y ago
    Who said anything about cost of getting caught? Tax avoidance is expressly defined as taking advantage of the legal options. There are a huge amount of loopholes out there, and a huge amount of effort goes into manufacturing legal ways to qualify for them. The overwhelming bulk of that effort is deadweight loss.

njarboe 9y ago

There are studies (ref?) that around 10% people start thinking seriously about avoidance. Western historical religious tithing is at this level. State sales taxes rarely go above this level. When you go higher the tax is generally somewhat hidden from the person in the form of withholding the tax by the employer or included it the price and collecting at every level of production, not just at the end sale, as with a VAT.

cjlars 9y ago

If you have a a 50% tax rate and can cut 10% off your tax bill with fancy accounting, your after tax income rises 10% to 55% of earnings. If you have a 10% tax rate and can cut 10% off your tax bill with fancy accounting, your after tax bill rises just over 1% to 91% of earnings. Decisions are made at the margin -- How much effort does it take to keep the extra cash and how much do you get to keep? high rates make tax evasion, legal or not, more worthwhile.

omegaworks 9y ago
Then it's a plain cost-benefit analysis. What you're missing are the three factors at play in cost: 1. The tax rate itself 2. The cost of avoiding it 3. The cost of getting caught We have control of 1 and 3 not just 1, and we can exert influence on 2. The double-Irish hole is closing.
- cjlars 9y ago
  Who said anything about cost of getting caught? Tax avoidance is expressly defined as taking advantage of the legal options. There are a huge amount of loopholes out there, and a huge amount of effort goes into manufacturing legal ways to qualify for them. The overwhelming bulk of that effort is deadweight loss.