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So what. There’s tax avoidance and loopholes now too. Whatever. The premise still holds fine, we could drastically increase marginal tax rates at the top end a

by CPLX 8y ago

So what. There’s tax avoidance and loopholes now too. Whatever. The premise still holds fine, we could drastically increase marginal tax rates at the top end and the world wouldn’t blow up. And to the extent we used that money to make the social contract more stable via health care and education or similar, there would almost certainly be net gains to national efficiency and income.

darawk 8y ago
> Whatever. The premise still holds fine, we could drastically increase marginal tax rates at the top end and the world wouldn’t blow up. No, the world would not blow up. But you'd generate basically zero revenue. People that make $10 million a year are mostly not making that in the form of cash compensation. And those that are have the leverage to demand different forms of compensation. Which they will immediately do. The person that person that makes that kind of money that also doesn't have the power to say "pay me in equity now, thanks" is extremely rare indeed.
- tedsanders 8y ago
  Doesn't income tax apply to equity grants too? (Genuine question.)
  - darawk 8y ago
    For options, not really: https://www.investopedia.com/articles/active-trading/061615/how-stock-options-are-taxed-reported.asp https://www.investopedia.com/articles/active-trading/061615/... In some cases yes, but often no.
    - tedsanders 8y ago
      I receive non-tradeable options from my employer. My understanding is that the value of the option is taxed as income upon exercise (or sale of stock, for statutory options). There are games to play about which tax year to exercise in, but no getting around the income tax. Can you explain how income tax is avoided with options? The only potential tax avoidance I see is: (1) avoided income tax by flexibility in timing of the exercise/sale (2) potentially avoided capital gains tax if the value of the option grows before exercise/sale In neither case do I see a way to get around income tax on options given as compensation for work.
- CPLX 8y ago
  > But you'd generate basically zero revenue. Extraordinary claims require extraordinary evidence, which you’re not providing. If you keep all else constant then raising the tax rate will raise revenue. Your narrative about how all else will not be held constant isn’t compelling. Whatever mechanisms you describe for tax avoidance are only marginally different at 35% than 70%, making your hypothesis of zero obvious fiction.
  - darawk 8y ago
    Did you read what I said? People in the bracket you're targeting don't get paid in cash. It's not a scheme, it's not theoretical, it's a fact.
    - CPLX 8y ago
      Then by your logic they aren’t paying any tax now either. So raising the rate won’t change anything. If so why not just do it for fun? Either they pay tax now at a certain rate or they don’t. Your premise that raising the rate won’t change the tax bill is based on your theory that whatever they’re paying now is just by their grace and free will?
      - opo 8y ago
        Because it hurts the economy. As I said previously, confiscatory high tax rates just result in politically connected groups getting tax breaks, lots of money spent in less productive ways to avoid the high rates and if those can't be done you get dead weight losses from economic activity that isn't done. There is a reason countries moved away from confiscatory high rates.
        CPLX 8y ago
        Some countries have some haven't. The top marginal tax rate in Denmark is over 60% I've been there, it's awesome, everything works super great, and the country consistently ranks as the happiest population on the planet. They also have a great economy. Meanwhile I've lived in the US for almost five decades and watched as the billionaire class has lobbied successfully for lower taxes, offshoring, financialization of everything, and criminalization of debt, leading to vast swaths of the country condemned to permanent economic misery, increased xenophobia and political instability, declining standards of healthcare, and an out of control problem of education debt for the next generation.
opo 8y ago
The actual tax burden has basically gone opposite of what you imply in your many messages. The top 10% paid 49% of taxes in 1980 and the bottom 50% paid 7% of income taxes. In 2015, the top 10% paid paid 70% of incomes taxes and the bottom 50% paid 3%. (http://www.ntu.org/foundation/page/who-pays-income-taxes http://www.ntu.org/foundation/page/who-pays-income-taxes) The "top marginal rate" means very little by itself. What matters is the effective rate which takes into account the credits/deductions that are allowed, the other lower marginal tax rates, etc. Confiscatory high tax rates just result in politically connected groups getting tax breaks, lots of money spent in less productive ways to avoid the high rates and if those can't be done you get dead weight losses from economic activity that isn't done. There is a reason countries moved away from confiscatory high rates.
- bitcoinbutter 8y ago
  Comparing what the top 10% paid vs bottom 50% is silly. The issue at hand is wealth inequality. Clearly the top earners are paying much more in tax from a clear dollar to dollar perspective. They own all the wealth. Taxes are one of the only ways to curb wealth inequality within a capitalist system. Any other ideas? The problem is that wealthy people can afford to set up multinational tax avoidance schemes to avoid actually paying the amount they should be paying. One solution is to just jack up the rates. If 90% marginal rate on paper only actually results in 45% being collected, then that's still better than 39% marginal rate on paper vs. 15-20% truly collected. Taxes and public spending are obviously not perfect, there are plenty of inefficiencies throughout. Corruption must be targeted rigorously, otherwise inequality will actually increase. But there needs to be a constant effort to reduce wealth centralization.
  - warbaker 8y ago
    Let's not conflate wealth with income. Generally, you get income by providing a service to the market in excess of that income (as perceived by the market, which can be wrong). If you have really high taxes, the only way to get rich is to be born rich. High estate taxes make a ton of sense from a social perspective. High income taxes, much less so.
  - 8y ago

by CPLX 8y ago

darawk 8y ago

> Whatever. The premise still holds fine, we could drastically increase marginal tax rates at the top end and the world wouldn’t blow up. No, the world would not blow up. But you'd generate basically zero revenue. People that make $10 million a year are mostly not making that in the form of cash compensation. And those that are have the leverage to demand different forms of compensation. Which they will immediately do. The person that person that makes that kind of money that also doesn't have the power to say "pay me in equity now, thanks" is extremely rare indeed.

tedsanders 8y ago
Doesn't income tax apply to equity grants too? (Genuine question.)
- darawk 8y ago
  For options, not really: https://www.investopedia.com/articles/active-trading/061615/how-stock-options-are-taxed-reported.asp https://www.investopedia.com/articles/active-trading/061615/... In some cases yes, but often no.
  - tedsanders 8y ago
    I receive non-tradeable options from my employer. My understanding is that the value of the option is taxed as income upon exercise (or sale of stock, for statutory options). There are games to play about which tax year to exercise in, but no getting around the income tax. Can you explain how income tax is avoided with options? The only potential tax avoidance I see is: (1) avoided income tax by flexibility in timing of the exercise/sale (2) potentially avoided capital gains tax if the value of the option grows before exercise/sale In neither case do I see a way to get around income tax on options given as compensation for work.
CPLX 8y ago
> But you'd generate basically zero revenue. Extraordinary claims require extraordinary evidence, which you’re not providing. If you keep all else constant then raising the tax rate will raise revenue. Your narrative about how all else will not be held constant isn’t compelling. Whatever mechanisms you describe for tax avoidance are only marginally different at 35% than 70%, making your hypothesis of zero obvious fiction.
- darawk 8y ago
  Did you read what I said? People in the bracket you're targeting don't get paid in cash. It's not a scheme, it's not theoretical, it's a fact.
  - CPLX 8y ago
    Then by your logic they aren’t paying any tax now either. So raising the rate won’t change anything. If so why not just do it for fun? Either they pay tax now at a certain rate or they don’t. Your premise that raising the rate won’t change the tax bill is based on your theory that whatever they’re paying now is just by their grace and free will?
    - opo 8y ago
      Because it hurts the economy. As I said previously, confiscatory high tax rates just result in politically connected groups getting tax breaks, lots of money spent in less productive ways to avoid the high rates and if those can't be done you get dead weight losses from economic activity that isn't done. There is a reason countries moved away from confiscatory high rates.
      - CPLX 8y ago
        Some countries have some haven't. The top marginal tax rate in Denmark is over 60% I've been there, it's awesome, everything works super great, and the country consistently ranks as the happiest population on the planet. They also have a great economy. Meanwhile I've lived in the US for almost five decades and watched as the billionaire class has lobbied successfully for lower taxes, offshoring, financialization of everything, and criminalization of debt, leading to vast swaths of the country condemned to permanent economic misery, increased xenophobia and political instability, declining standards of healthcare, and an out of control problem of education debt for the next generation.

opo 8y ago

The actual tax burden has basically gone opposite of what you imply in your many messages. The top 10% paid 49% of taxes in 1980 and the bottom 50% paid 7% of income taxes. In 2015, the top 10% paid paid 70% of incomes taxes and the bottom 50% paid 3%. (http://www.ntu.org/foundation/page/who-pays-income-taxes http://www.ntu.org/foundation/page/who-pays-income-taxes) The "top marginal rate" means very little by itself. What matters is the effective rate which takes into account the credits/deductions that are allowed, the other lower marginal tax rates, etc. Confiscatory high tax rates just result in politically connected groups getting tax breaks, lots of money spent in less productive ways to avoid the high rates and if those can't be done you get dead weight losses from economic activity that isn't done. There is a reason countries moved away from confiscatory high rates.

bitcoinbutter 8y ago
Comparing what the top 10% paid vs bottom 50% is silly. The issue at hand is wealth inequality. Clearly the top earners are paying much more in tax from a clear dollar to dollar perspective. They own all the wealth. Taxes are one of the only ways to curb wealth inequality within a capitalist system. Any other ideas? The problem is that wealthy people can afford to set up multinational tax avoidance schemes to avoid actually paying the amount they should be paying. One solution is to just jack up the rates. If 90% marginal rate on paper only actually results in 45% being collected, then that's still better than 39% marginal rate on paper vs. 15-20% truly collected. Taxes and public spending are obviously not perfect, there are plenty of inefficiencies throughout. Corruption must be targeted rigorously, otherwise inequality will actually increase. But there needs to be a constant effort to reduce wealth centralization.
- warbaker 8y ago
  Let's not conflate wealth with income. Generally, you get income by providing a service to the market in excess of that income (as perceived by the market, which can be wrong). If you have really high taxes, the only way to get rich is to be born rich. High estate taxes make a ton of sense from a social perspective. High income taxes, much less so.
- 8y ago