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The "marginal" think really does throw this off. The "marginal rate" means the amount you'll be taxed for the next dollar you earn. So this tells us little abo
by CWuestefeld 16y ago
The "marginal" think really does throw this off. The "marginal rate" means the amount you'll be taxed for the next dollar you earn.
So this tells us little about the rate that each person already paid for the amount below the margin, the "body" of earnings, if you will.
Actually, the more I think about it, the more I think that the idea of a flat marginal rate is a good thing: that means there's little disincentive to produce more. I would have thought that a flat marginal rate with a curved "body" rate would be darned near impossible to implement, but this makes it sound like that's been fairly successful.
Of course, the fact that the marginal rate is 40% is a very bad thing. The government should not make up a plurality of our spending.
- waqf 16y agoA flat marginal rate with a curved average rate certainly is impossible: http://en.wikipedia.org/wiki/Fundamental_theorem_of_calculus http://en.wikipedia.org/wiki/Fundamental_theorem_of_calculus
- CWuestefeld 16y agoThe theorem only works for continuous functions. Tax rates are anything but continuous. They have sharp elbows (e.g., AMT), and some taxes wink into existence and back out again within a finite range (e.g., EIC). I'm not sure that these exceptions are sufficient to allow it to work out, but I'm pretty sure that this rule isn't the impediment.
- cynicalkane 16y agoThen the marginal rate must be flat except for discontinuities. It will effectively not be a flat marginal rate except for finite intervals. And if the tax burden is meaningfully curved, the tax rate must have discontinuities in meaningful places.
- orangecat 16y agoWouldn't a completely flat tax with a fixed deduction/rebate achieve that? Say, 25% of your income minus $10k. The marginal rate is always 25%, the average rate is negative for incomes below $40k and asymptotically approaches 25% as it increases.