5 ms·

Ideally there would be tax brackets so people making $150,000/year aren't taking home poverty wages, but people making $1,000,000,000/year are taking home maybe

Ideally there would be tax brackets so people making $150,000/year aren't taking home poverty wages, but people making $1,000,000,000/year are taking home maybe a couple tens of millions, which is still perfectly comfortable to live on for an entire lifetime.

darawk 8y ago
I think you're missing his point. Say your hypothetical person is making $10,000,000/year already. He has the opportunity to work 40% harder to 10x his income up to $100M/year. However, at this point, his marginal tax rate under your scheme is already 97%, which means that on that extra $90M in theoretical income, he will only take home an extra $2.7M. Now, it's not worth it for him to make that extra effort, to only increase his realized income by 27%. The next question is: Why should you, someone presumably not making $10m/year, care? We care because when someone increases their earnings from $10M to $100M, in theory, they are doing so by creating value for society. In fact the people at the highest ends of the income distribution should be the ones creating the most value. So we really do want them to be incentivized to earn more. To ensure that they are, we need a top marginal rate that strikes a balance between unnecessary super wealth, and incentivizing the value creation that drives the tremendous prosperity of the modern economy. This is a delicate balancing act, to be sure. But it is extremely important to understand that it is a balancing act.
- foxhop 8y ago
  You don't 10x by working harder. You do other things but likely not work.
  - darawk 8y ago
    That's pretty empirically false.
    - nostrademons 8y ago
      Empirical with what data? The rich people I know get there not through working harder, but through making better decisions than ordinary people, in particular in figuring out what to work on. You certainly can't just work 10x harder to go from making $1M - $10M - you have to do qualitatively different stuff. Similarly in going from $10M - $100M.
      - darawk 8y ago
        Of course. Subsumed in working harder is making an effort to work smarter, taking larger risks, etc.
- notahacker 8y ago
  The standard answer would be that if someone already making $10m/year considers increasing their work ethic by 40%, they are almost certainly doing so for reasons other than need more spendable cash...
  - darawk 8y ago
    First of all, that's pretty clearly not actually true, if you bother to think about it. And secondly, even if it were true, I don't see how it's relevant.
    - notahacker 8y ago
      If you're already earning far more than you are ever likely to consume and considering putting in 40% extra workload, as the person in your example is doing, you are almost certainly doing so because you deeply believe in a mission or hypothesis, because you want to beat someone to something or because you like the status of being the person to transform the fortunes of $company or found $newcompany, not because you have the instrumental objective of receiving a set percentage of the target $100m pa profit in your personal bank account. If the money's more for keeping score, gross earnings do the trick. You might even struggle to see how the tax rate on your personal income stream is relevant. Work incentives look very different at the extreme ends of the income spectrum (as does the relationship between work ethic and earnings). Someone considering putting in 40% extra workload because their lifestyle is insufficient on $10m a year[1], would be fairly unusual, even for a multimillionaire. It's much lower down the income scale where people work to fulfil their [future] consumption needs rather than despite having already met them that the work disincentive effects of higher taxes kick in. There are other arguments against high super taxes like how easily they're circumvented and how they deter millionaires from parking their money in a particular country in an era of high capital mobility, and in some cases how they dilute efficient owner control, but the idea that the likes of Buffet, Gates and Bezos or even mere movie stars would have lost interest in working hard if their resulting disposable income stream were to be reduced by a [punitively] high tax rate is a little difficult to credit. [1]there's even less you can't buy on $10m a year when overpriced luxuries for conspicuous consumers are depressed by high income tax on the superrich...

darawk 8y ago

I think you're missing his point. Say your hypothetical person is making $10,000,000/year already. He has the opportunity to work 40% harder to 10x his income up to $100M/year. However, at this point, his marginal tax rate under your scheme is already 97%, which means that on that extra $90M in theoretical income, he will only take home an extra $2.7M. Now, it's not worth it for him to make that extra effort, to only increase his realized income by 27%. The next question is: Why should you, someone presumably not making $10m/year, care? We care because when someone increases their earnings from $10M to $100M, in theory, they are doing so by creating value for society. In fact the people at the highest ends of the income distribution should be the ones creating the most value. So we really do want them to be incentivized to earn more. To ensure that they are, we need a top marginal rate that strikes a balance between unnecessary super wealth, and incentivizing the value creation that drives the tremendous prosperity of the modern economy. This is a delicate balancing act, to be sure. But it is extremely important to understand that it is a balancing act.

foxhop 8y ago
You don't 10x by working harder. You do other things but likely not work.
- darawk 8y ago
  That's pretty empirically false.
  - nostrademons 8y ago
    Empirical with what data? The rich people I know get there not through working harder, but through making better decisions than ordinary people, in particular in figuring out what to work on. You certainly can't just work 10x harder to go from making $1M - $10M - you have to do qualitatively different stuff. Similarly in going from $10M - $100M.
    - darawk 8y ago
      Of course. Subsumed in working harder is making an effort to work smarter, taking larger risks, etc.
notahacker 8y ago
The standard answer would be that if someone already making $10m/year considers increasing their work ethic by 40%, they are almost certainly doing so for reasons other than need more spendable cash...
- darawk 8y ago
  First of all, that's pretty clearly not actually true, if you bother to think about it. And secondly, even if it were true, I don't see how it's relevant.
  - notahacker 8y ago
    If you're already earning far more than you are ever likely to consume and considering putting in 40% extra workload, as the person in your example is doing, you are almost certainly doing so because you deeply believe in a mission or hypothesis, because you want to beat someone to something or because you like the status of being the person to transform the fortunes of $company or found $newcompany, not because you have the instrumental objective of receiving a set percentage of the target $100m pa profit in your personal bank account. If the money's more for keeping score, gross earnings do the trick. You might even struggle to see how the tax rate on your personal income stream is relevant. Work incentives look very different at the extreme ends of the income spectrum (as does the relationship between work ethic and earnings). Someone considering putting in 40% extra workload because their lifestyle is insufficient on $10m a year[1], would be fairly unusual, even for a multimillionaire. It's much lower down the income scale where people work to fulfil their [future] consumption needs rather than despite having already met them that the work disincentive effects of higher taxes kick in. There are other arguments against high super taxes like how easily they're circumvented and how they deter millionaires from parking their money in a particular country in an era of high capital mobility, and in some cases how they dilute efficient owner control, but the idea that the likes of Buffet, Gates and Bezos or even mere movie stars would have lost interest in working hard if their resulting disposable income stream were to be reduced by a [punitively] high tax rate is a little difficult to credit. [1]there's even less you can't buy on $10m a year when overpriced luxuries for conspicuous consumers are depressed by high income tax on the superrich...