4 ms·

Something is wrong with your argument because America used to have higher tax-rates, and the economy worked better for most Americans.

whamlastxmas 8y ago
I support much higher tax rates but you can't argue there's much causality between the high tax rates we had and how high the quality of living was at the time. It was a tremendously different era in a ton of ways.
- charlesism 8y ago
  It was a tremendously different era in a ton of ways. I disagree it was "tremendous", but it is a fruitless argument. There is an endless number of differences and similarities we could trade with each other.
rayiner 8y ago
America never had tax rates like Sweden's. There were nominal tax rates that were very high, but they kicked in so high almost nobody paid them: https://www.theblaze.com/contributions/the-myth-of-the-90-percent-tax-rate https://www.theblaze.com/contributions/the-myth-of-the-90-pe....
- charlesism 8y ago
  Did you take the article to mean that everyone in Sweden pays 70%?
  - rayiner 8y ago
    By comparison, yes. Sweden's top tax bracket kicks in at just 1.5x the average income. The 69% tax bracket kicked in at $38,000 in 1955, about 8x the average income. As the article I linked to explains, deductions were much more extensive back then too. The result is that the average tax rate on say the 1% has actually not dropped that much: https://almostclassical.blogspot.com/2011/03/90-tax-rate-myth.html https://almostclassical.blogspot.com/2011/03/90-tax-rate-myt.... It was 40-45% in the 1950s and 1960s, and has fluctuated between 30-40% since the late 1980s.
- roenxi 8y ago
  The issue with using data about a 90% style tax rates is that nobody will ever be paying that rate. Why would anyone continue working for an income if they were paying 90% of it in tax? They'd find some way of organising their affairs so that they are compensated in some manner that is not income, or they'd stop working. Eg, Maybe a company director is being paid $300,000 per annum, then a 90% tax rate for incomes >$100,000 is bought in. Suddenly his wife and son have a job at the company as advisors on $100,000 per annum each, their jobs are remarkably work-lite, and the director's salary drops to $100,000. Adjust as needed to be compliant with local law.
  - harryh 8y ago
    Untaxed fringe benefits (company car, extravagant meals on the company dime, etc) were much more common in the US when we had very high marginal tax rates on large incomes.
  - bryanlarsen 8y ago
    "Why would anyone continue working for an income if they were paying 90% of it in tax?" The average American has already spent most or all of their wage before they receive it. 40 cents in taxes, 35 cents in rent, 8 cents for food, ... If they're lucky, they can spend 5 cents of that dollar on something of their choice. Whereas if they get an extra dollar "bonus" from their job, that dollar is unallocated and they can allocate it however they want. So that extra 10 cents from the marginal dollar at a rate of 90% may be worth "more" to them than the dollar they earned at the lower base rate. "They'd find some way of organising their affairs so that they are compensated in some manner that is not income," The rich will spend a lot of effort on tax avoidance and tax evasion whether the tax rate is 35% or 70%.
    - roenxi 8y ago
      > The average American has already spent most or all of their wage before they receive it. 40 cents in taxes, 35 cents in rent, 8 cents for food, ... If they're lucky, they can spend 5 cents of that dollar on something of their choice. You can't claim that 60c in the dollar of non-tax spending is somehow equivalent to a tax. I mean, the people who pay taxes are almost always experiencing a net transfer payment away from them to others, it isn't like anyone thinks it is sensible for the government to take 35c from the average American to provide 35c of rental assistance to the average American, everyone knows that is stupid. It only makes sense to tax if it is for a transfer payment from wealthy to poor, or to fund something communal, eg, infrastructure. Spending on things you will personally and exclusively enjoy is different from being taxed. 10c marginal is never going to be worth more to someone than their first few dollars, marginal utility goes down [0]. > The rich will spend a lot of effort on tax avoidance and tax evasion whether the tax rate is 35% or 70%. That is just vague and mean spirited. I'll accept that only the rich engage in tax avoidance/evasion, because it doesn't help poor people, but if you want to make a point here you are really going to need to provide a source or elaborate a bit. I think we'd find in practice that as the merginal rate rises, the rich would be more likely to engage in tax minimisation practices - and this is because at very high marginal rates how would anyone become rich while paying a punitive tax rate? [0] https://www.economicshelp.org/blog/12309/concepts/diminishing-marginal-utility-of-income-and-wealth/ https://www.economicshelp.org/blog/12309/concepts/diminishin...
burfog 8y ago
Companies were smaller. Pay difference between the top and bottom of the corporate hierarchy is greatly affected by corporation size. We mostly stopped breaking up corporations long before we had those higher tax rates, and the technology changes since that time have made very large corporations easier to manage. We dropped our tariffs while increasing our regulations, which caused outsourcing. Americans lost their jobs to foreign countries. We increased the supply of workers, particularly low-skilled workers, by failing to apply our laws at the border and with visa overstays. As a simple matter of supply and demand, the price of labor plummeted. We increased the cost of living with regulations. It all adds up: zoning, car safety, building codes, etc. This is great if you are not poor and you can't bear the sight of poor people living in conditions that are not as nice as the ones you can afford. Large numbers of women entered the workforce. The extra family income let the dual-income couples bid up the price of housing and other things. To keep up, others felt forced to do likewise. With that being the norm now, prices are higher and so people generally aren't financially better off.
- rixed 8y ago
  > Large numbers of women entered the workforce. ... With that being the norm now, prices are higher and so people generally aren't financially better off. Women are financially better off.
  - burfog 8y ago
    Before: did the housework, prices were low After: doing the housework, prices are high, also need to work to cover the higher prices, and much of the extra money goes to childcare and transportation and other work expenses That doesn't look like "financially better off" to me. It looks more like being enslaved to landlords and corporate America.
    - rixed 8y ago
      I get why, in a world where women depend on men for income, housework fall on women (not only housework but other even nastier things). But in a world where women earn their own income I don't think your can continue to assume that. It's probably more like: Before: was enslaved to men. After: is enslaved to landlords and corporations. That's still progress in many cases, I think.

whamlastxmas 8y ago

I support much higher tax rates but you can't argue there's much causality between the high tax rates we had and how high the quality of living was at the time. It was a tremendously different era in a ton of ways.

charlesism 8y ago
It was a tremendously different era in a ton of ways. I disagree it was "tremendous", but it is a fruitless argument. There is an endless number of differences and similarities we could trade with each other.

rayiner 8y ago

America never had tax rates like Sweden's. There were nominal tax rates that were very high, but they kicked in so high almost nobody paid them: https://www.theblaze.com/contributions/the-myth-of-the-90-percent-tax-rate https://www.theblaze.com/contributions/the-myth-of-the-90-pe....

charlesism 8y ago
Did you take the article to mean that everyone in Sweden pays 70%?
- rayiner 8y ago
  By comparison, yes. Sweden's top tax bracket kicks in at just 1.5x the average income. The 69% tax bracket kicked in at $38,000 in 1955, about 8x the average income. As the article I linked to explains, deductions were much more extensive back then too. The result is that the average tax rate on say the 1% has actually not dropped that much: https://almostclassical.blogspot.com/2011/03/90-tax-rate-myth.html https://almostclassical.blogspot.com/2011/03/90-tax-rate-myt.... It was 40-45% in the 1950s and 1960s, and has fluctuated between 30-40% since the late 1980s.
roenxi 8y ago
The issue with using data about a 90% style tax rates is that nobody will ever be paying that rate. Why would anyone continue working for an income if they were paying 90% of it in tax? They'd find some way of organising their affairs so that they are compensated in some manner that is not income, or they'd stop working. Eg, Maybe a company director is being paid $300,000 per annum, then a 90% tax rate for incomes >$100,000 is bought in. Suddenly his wife and son have a job at the company as advisors on $100,000 per annum each, their jobs are remarkably work-lite, and the director's salary drops to $100,000. Adjust as needed to be compliant with local law.
- harryh 8y ago
  Untaxed fringe benefits (company car, extravagant meals on the company dime, etc) were much more common in the US when we had very high marginal tax rates on large incomes.
- bryanlarsen 8y ago
  "Why would anyone continue working for an income if they were paying 90% of it in tax?" The average American has already spent most or all of their wage before they receive it. 40 cents in taxes, 35 cents in rent, 8 cents for food, ... If they're lucky, they can spend 5 cents of that dollar on something of their choice. Whereas if they get an extra dollar "bonus" from their job, that dollar is unallocated and they can allocate it however they want. So that extra 10 cents from the marginal dollar at a rate of 90% may be worth "more" to them than the dollar they earned at the lower base rate. "They'd find some way of organising their affairs so that they are compensated in some manner that is not income," The rich will spend a lot of effort on tax avoidance and tax evasion whether the tax rate is 35% or 70%.
  - roenxi 8y ago
    > The average American has already spent most or all of their wage before they receive it. 40 cents in taxes, 35 cents in rent, 8 cents for food, ... If they're lucky, they can spend 5 cents of that dollar on something of their choice. You can't claim that 60c in the dollar of non-tax spending is somehow equivalent to a tax. I mean, the people who pay taxes are almost always experiencing a net transfer payment away from them to others, it isn't like anyone thinks it is sensible for the government to take 35c from the average American to provide 35c of rental assistance to the average American, everyone knows that is stupid. It only makes sense to tax if it is for a transfer payment from wealthy to poor, or to fund something communal, eg, infrastructure. Spending on things you will personally and exclusively enjoy is different from being taxed. 10c marginal is never going to be worth more to someone than their first few dollars, marginal utility goes down [0]. > The rich will spend a lot of effort on tax avoidance and tax evasion whether the tax rate is 35% or 70%. That is just vague and mean spirited. I'll accept that only the rich engage in tax avoidance/evasion, because it doesn't help poor people, but if you want to make a point here you are really going to need to provide a source or elaborate a bit. I think we'd find in practice that as the merginal rate rises, the rich would be more likely to engage in tax minimisation practices - and this is because at very high marginal rates how would anyone become rich while paying a punitive tax rate? [0] https://www.economicshelp.org/blog/12309/concepts/diminishing-marginal-utility-of-income-and-wealth/ https://www.economicshelp.org/blog/12309/concepts/diminishin...

burfog 8y ago

Companies were smaller. Pay difference between the top and bottom of the corporate hierarchy is greatly affected by corporation size. We mostly stopped breaking up corporations long before we had those higher tax rates, and the technology changes since that time have made very large corporations easier to manage. We dropped our tariffs while increasing our regulations, which caused outsourcing. Americans lost their jobs to foreign countries. We increased the supply of workers, particularly low-skilled workers, by failing to apply our laws at the border and with visa overstays. As a simple matter of supply and demand, the price of labor plummeted. We increased the cost of living with regulations. It all adds up: zoning, car safety, building codes, etc. This is great if you are not poor and you can't bear the sight of poor people living in conditions that are not as nice as the ones you can afford. Large numbers of women entered the workforce. The extra family income let the dual-income couples bid up the price of housing and other things. To keep up, others felt forced to do likewise. With that being the norm now, prices are higher and so people generally aren't financially better off.

rixed 8y ago
> Large numbers of women entered the workforce. ... With that being the norm now, prices are higher and so people generally aren't financially better off. Women are financially better off.
- burfog 8y ago
  Before: did the housework, prices were low After: doing the housework, prices are high, also need to work to cover the higher prices, and much of the extra money goes to childcare and transportation and other work expenses That doesn't look like "financially better off" to me. It looks more like being enslaved to landlords and corporate America.
  - rixed 8y ago
    I get why, in a world where women depend on men for income, housework fall on women (not only housework but other even nastier things). But in a world where women earn their own income I don't think your can continue to assume that. It's probably more like: Before: was enslaved to men. After: is enslaved to landlords and corporations. That's still progress in many cases, I think.