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This article declares that a 70% marginal tax rate on income above $10M/year is bad policy, but the only justification it offers for it being bad policy is that

This article declares that a 70% marginal tax rate on income above $10M/year is bad policy, but the only justification it offers for it being bad policy is that adding in NY state/local taxes would raise that number to 82.7%. So what? I've seen repeated countless times recently that the marginal tax rate on the rich used to be as high as 91%. Why is a combined tax rate of 82.7% bad policy? And if that's really your only justification, then the fix here is to just make the state/local taxes deductible again.

nopriorarrests 8y ago
I've seen repeated countless times recently that the marginal tax rate on the rich used to be as high as 91% Between 1950 and 1959, he notes, the highest earning 1 percent of Americans paid an effective tax rate of 42 percent. By 2014, it was only down to 36.4 percent—a substantial but by no means astronomical decline. <...> There are a few obvious reasons why the taxes the rich actually paid in the 1950s were so much lower than the confiscatory top rates that sat on the books. For one, the max tax rates on investment income were far lower than on wages and salaries, which gave a lot of wealthy individuals some relief. Tax avoidance may have also been a big problem. Moreover, there simply weren’t that many extraordinarily rich households. Those fabled 90 percent tax rates only bit at incomes over $200,000, the equivalent of more than $2 million in today’s dollars. As Greenberg notes, the tax may have only applied to 10,000 families. https://slate.com/business/2017/08/the-history-of-tax-rates-for-the-rich.html https://slate.com/business/2017/08/the-history-of-tax-rates-...
- eridius 8y ago
  > Those fabled 90 percent tax rates only bit at incomes over $200,000, the equivalent of more than $2 million in today’s dollars. And the proposed 70% tax rate only applies to incomes over $10 million in today's dollars.
munk-a 8y ago
SALT exemptions should definitely not be restored - I grew up in the north east where those SALT exemptions are fully utilized but they introduce an illogical perverse motivation for state and local governments to spend freely since any taxes they introduce are essentially just that level of government getting a free non-revokable payment from the federal government. I do acknowledge that areas with SALT exemptions tend to be areas that pay a disproportionate amount of taxes for the benefits they receive but I think this solution to that issue is ludicrous. Investment by the government should ideally try and maximize the benefits given by that investment means that denser population areas should be targeted unequally to receive benefits but SALT exemptions are crazy. Also, just a note, this portion of their argument seems silly, what is one number compared to another number without context, if 82.7% is just too much for the market to bear than let's talk about 58.3% as a base marginal tax rate on $10M and above - in actuality the utility of assets decreases so steeply that I don't know if 82.7% really is "silly" but all this talk about specific numbers should be decided by people way more specialized than the general public.
- Eridrus 8y ago
  > they introduce an illogical perverse motivation for state and local governments to spend freely since any taxes they introduce are essentially just that level of government getting a free non-revokable payment from the federal government. This is just not true. The SALT exemption lets you deduct the SALT taxes from your income, not your tax bill, so this is not just a transfer from the federal government. I.e. If you had a flat federal rate of 10%, a flat state rate of 10% and an income of 100k, the SALT deduction would reduce your taxes from 20k to 19k. There is some subsidy here since the state gets 10k, whereas you are only paying 9k for those services, but its clearly not free money. > what is one number compared to another number without context Economists have studied the topic of most efficient tax rates, in terms of bringing in government revenue, and 82.7% is above the point where you maximize revenue, i.e. you would raise more money with a lower rate.
  - eridius 8y ago
    > Economists have studied the topic of most efficient tax rates, in terms of bringing in government revenue, and 82.7% is above the point where you maximize revenue, i.e. you would raise more money with a lower rate. I don't think "raise the most money" is the goal we're shooting for though. I mean, it's important, but it's not the only goal.
    - hackeraccount 8y ago
      When you start talking about rates in the 90% range what you're really asking for is for rich people to hire a tax attorney or account to lie to you about how much money the rich person makes. It's the definition of dead weight loss.
      - eridius 8y ago
        Rich people find tax loopholes to exploit. Outright lying can get them thrown in jail.
    - Eridrus 8y ago

nopriorarrests 8y ago

I've seen repeated countless times recently that the marginal tax rate on the rich used to be as high as 91% Between 1950 and 1959, he notes, the highest earning 1 percent of Americans paid an effective tax rate of 42 percent. By 2014, it was only down to 36.4 percent—a substantial but by no means astronomical decline. <...> There are a few obvious reasons why the taxes the rich actually paid in the 1950s were so much lower than the confiscatory top rates that sat on the books. For one, the max tax rates on investment income were far lower than on wages and salaries, which gave a lot of wealthy individuals some relief. Tax avoidance may have also been a big problem. Moreover, there simply weren’t that many extraordinarily rich households. Those fabled 90 percent tax rates only bit at incomes over $200,000, the equivalent of more than $2 million in today’s dollars. As Greenberg notes, the tax may have only applied to 10,000 families. https://slate.com/business/2017/08/the-history-of-tax-rates-for-the-rich.html https://slate.com/business/2017/08/the-history-of-tax-rates-...

eridius 8y ago
> Those fabled 90 percent tax rates only bit at incomes over $200,000, the equivalent of more than $2 million in today’s dollars. And the proposed 70% tax rate only applies to incomes over $10 million in today's dollars.

munk-a 8y ago

SALT exemptions should definitely not be restored - I grew up in the north east where those SALT exemptions are fully utilized but they introduce an illogical perverse motivation for state and local governments to spend freely since any taxes they introduce are essentially just that level of government getting a free non-revokable payment from the federal government. I do acknowledge that areas with SALT exemptions tend to be areas that pay a disproportionate amount of taxes for the benefits they receive but I think this solution to that issue is ludicrous. Investment by the government should ideally try and maximize the benefits given by that investment means that denser population areas should be targeted unequally to receive benefits but SALT exemptions are crazy. Also, just a note, this portion of their argument seems silly, what is one number compared to another number without context, if 82.7% is just too much for the market to bear than let's talk about 58.3% as a base marginal tax rate on $10M and above - in actuality the utility of assets decreases so steeply that I don't know if 82.7% really is "silly" but all this talk about specific numbers should be decided by people way more specialized than the general public.

Eridrus 8y ago
> they introduce an illogical perverse motivation for state and local governments to spend freely since any taxes they introduce are essentially just that level of government getting a free non-revokable payment from the federal government. This is just not true. The SALT exemption lets you deduct the SALT taxes from your income, not your tax bill, so this is not just a transfer from the federal government. I.e. If you had a flat federal rate of 10%, a flat state rate of 10% and an income of 100k, the SALT deduction would reduce your taxes from 20k to 19k. There is some subsidy here since the state gets 10k, whereas you are only paying 9k for those services, but its clearly not free money. > what is one number compared to another number without context Economists have studied the topic of most efficient tax rates, in terms of bringing in government revenue, and 82.7% is above the point where you maximize revenue, i.e. you would raise more money with a lower rate.
- eridius 8y ago
  > Economists have studied the topic of most efficient tax rates, in terms of bringing in government revenue, and 82.7% is above the point where you maximize revenue, i.e. you would raise more money with a lower rate. I don't think "raise the most money" is the goal we're shooting for though. I mean, it's important, but it's not the only goal.
  - hackeraccount 8y ago
    When you start talking about rates in the 90% range what you're really asking for is for rich people to hire a tax attorney or account to lie to you about how much money the rich person makes. It's the definition of dead weight loss.
    - eridius 8y ago
      Rich people find tax loopholes to exploit. Outright lying can get them thrown in jail.
  - Eridrus 8y ago