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Marginal return. If working an extra hour per day will give me $100 pre-tax, tax rate being 10% and 90% will largely determine whether I'd do the extra work, ve
by bilkoo 9y ago
Marginal return. If working an extra hour per day will give me $100 pre-tax, tax rate being 10% and 90% will largely determine whether I'd do the extra work, versus spending that hour with family etc.
Everyone has different threshold for pay/fun ratios but overall society will be less productive as tax rates go up at least in the static sense (not considering tax money being put into productivity-increasing use).
- hedora 9y agoIf people make enough to retire every three years at a 0% tax rate, then most people will retire or switch to a less productive hobby job, because the marginal utility of more money approaches zero after three years. Tax those same people 90%, and they’ll work for 30 years. There is evidence of this phenomenon from the early days of the automobile: Craftsmen building cars by hand could and did retire after a few dozen cars, further inflating wages by constricting demand of labor. In contrast, Ford’s screw-turning factory workers worked for decades. I don’t buy that lowering effective wages decreases the number of hours most people will be willing to work.
- bilkoo 9y agoIndividually, maybe. Let alone the ethical implication of 'tax them high enough so they don't retire early', artificially lowering the income of a trade would - to your point - constrict *supply of labor. And of course this would lower the total productivity of the industry and society. And the Ford example, while interesting, doesn't have to do with taxes does it? It has to do with Ford lowering the barrier of entry for factory workers AND increasing productivity rate at the same time. I think we can all agree that that advancement was good for society as a whole? Am I understanding you correctly? Or is there something I am missing?