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The top marginal tax rate in the US only kicks in if you make more than $500,000/yr. Unless you're already making that much, how does a higher marginal tax rat

The top marginal tax rate in the US only kicks in if you make more than $500,000/yr. Unless you're already making that much, how does a higher marginal tax rate on income over $500k affect you at all?

assblaster 8y ago
I would work less. A lot less. I'm at 7 days a week working, I would cut back to 5 days or fewer. Why would I continue to push hard for money that will just go to the government?
- deleted 8y ago
  [deleted]
- jayd16 8y ago
  Somehow I think we'll find others to blast assess.
- belltaco 8y ago
  That sounds like a good thing.
  - assblaster 8y ago
    Doing less productive things with my time because I am essentially forced to through the tax code should be considered heavy handed government interference in my life.
- roywiggins 8y ago
  If you make more than $500k, you're already sending 37% back to the Feds. If you're in a high-tax state you're probably sending significantly more. Increasing the top tax rate is just a difference in degree.
- dragonwriter 8y ago
  > I would work less. A lot less. I'm at 7 days a week working, I would cut back to 5 days or fewer. Okay. So what?
marcinzm 8y ago
>Unless you're already making that much, how does a higher marginal tax rate on income over $500k affect you at all? We're on the ycombinator website, presumably the concept of stock options is not foreign to those here. Taking less salary for years with the potential for an IPO is a lot less lucrative when your payout goes down by 50% due to taxes.
- dragonwriter 8y ago
  > Taking less salary for years with the potential for an IPO is a lot less lucrative when your payout goes down by 50% due to taxes. Since we're talking about an increase in the top marginal income tax rates, sacrificing regular income for a chance of a big capital gains payout would actually be more, not less attractive, unless this was pared with treating capital gains as normal income—and even then, would probably remain more attractive if also coupled to provisions allowing spreading income spikes (whether due to one-time capital events or otherwise) out via advance and/or deferred recognition options, which is probably necessary for basic fairness if capital gains are treated as regular income—and actually that helps with fairness for some regular income patterns as well.
- pwinnski 8y ago
  The top marginal tax rate is already 37% and kicks in at $510,300 for a single person. So if your payout is a million, say, then what happens is that your "less salary" (let's pretend you've slaved away for a pittance of, say, $200k) is taxed normally, and then the first $300 or so of your imagined payout is also taxed normally, but the last bit, the amount over $510,300, is taxed at an additional 13% over what happens today. So if by "a lot less lucrative" you meant "13% less lucrative," then okay.
hirundo 8y ago
E.g. if it hurts the economy, like by slowing economic growth and lowering demand for labor. It would tend to transfer investment decisions from successful business people who like to grow their business to politicians who like to redistribute.
- roywiggins 8y ago
  The linked article specifically argues that it would not hurt the economy. My question was how does it "kill motivation" to make money, really.
  - hirundo 8y ago
    To the extent that people are motivated to make money the prospect of making less of it reduces their motivation.
    - deleted 8y ago
      [deleted]
  - jquery 8y ago
    The linked article does a poor job of convincing skeptics, it only looked at nominal rates, not effective rates, and additionally confused the issue by looking at the first derivative of the top marginal rate. Finally, it didn’t even fix the marginal rate to an exchange-rate fixed income ceiling across countries. Sloppy methodology with a conclusion in search of evidence.
atlantacrackers 8y ago
because people don't vote purely for self interest. Maybe you are aspirational and want to earn that much some day. Maybe you believe it best for government to be less a part of daily life than more. Maybe you think higher rates will cause successful people to look for lower rate countries to take their talents. Or maybe, you think it is morally wrong for people to vote to grab money lawfully earned from others just because they can.
- roywiggins 8y ago
  If we're just talking aspirations, if (1-taxes) halves, then I'll just aspire to earn double. Earning 1M a year is almost exactly as plausible as earning 2M a year for the vast majority of people.
- dragonwriter 8y ago
  > Maybe you are aspirational and want to earn that much some day Raising taxes on those already making that much makes it more likely, not less likely, that you will be able to do so.
  - atlantacrackers 8y ago
    OP stated: Unless you're already making that much, how does a higher marginal tax rate on income over $500k affect you at all? So, if you want to make that much some day, then it would affect you when you do. Further - raising rates on high income earners makes it more likely for others to make more? That seems dubious.
    - roywiggins 8y ago
      One argument in the original article is that an awful lot of that >$500k income is just non-productive rents levied on the lower income brackets anyway, so discouraging wasteful rentier behavior is a net positive (as it reduces inequality) without reducing productivity at all, since rents by definition aren't productive, they just siphon money into top earners' pockets rather than growing the economy at all. Decreasing rent-seeking in top earners will leave more money on the table for everyone else.

assblaster 8y ago

I would work less. A lot less. I'm at 7 days a week working, I would cut back to 5 days or fewer. Why would I continue to push hard for money that will just go to the government?

deleted 8y ago
[deleted]
jayd16 8y ago
Somehow I think we'll find others to blast assess.
belltaco 8y ago
That sounds like a good thing.
- assblaster 8y ago
  Doing less productive things with my time because I am essentially forced to through the tax code should be considered heavy handed government interference in my life.
roywiggins 8y ago
If you make more than $500k, you're already sending 37% back to the Feds. If you're in a high-tax state you're probably sending significantly more. Increasing the top tax rate is just a difference in degree.
dragonwriter 8y ago
> I would work less. A lot less. I'm at 7 days a week working, I would cut back to 5 days or fewer. Okay. So what?

marcinzm 8y ago

>Unless you're already making that much, how does a higher marginal tax rate on income over $500k affect you at all? We're on the ycombinator website, presumably the concept of stock options is not foreign to those here. Taking less salary for years with the potential for an IPO is a lot less lucrative when your payout goes down by 50% due to taxes.

dragonwriter 8y ago
> Taking less salary for years with the potential for an IPO is a lot less lucrative when your payout goes down by 50% due to taxes. Since we're talking about an increase in the top marginal income tax rates, sacrificing regular income for a chance of a big capital gains payout would actually be more, not less attractive, unless this was pared with treating capital gains as normal income—and even then, would probably remain more attractive if also coupled to provisions allowing spreading income spikes (whether due to one-time capital events or otherwise) out via advance and/or deferred recognition options, which is probably necessary for basic fairness if capital gains are treated as regular income—and actually that helps with fairness for some regular income patterns as well.
pwinnski 8y ago
The top marginal tax rate is already 37% and kicks in at $510,300 for a single person. So if your payout is a million, say, then what happens is that your "less salary" (let's pretend you've slaved away for a pittance of, say, $200k) is taxed normally, and then the first $300 or so of your imagined payout is also taxed normally, but the last bit, the amount over $510,300, is taxed at an additional 13% over what happens today. So if by "a lot less lucrative" you meant "13% less lucrative," then okay.

hirundo 8y ago

E.g. if it hurts the economy, like by slowing economic growth and lowering demand for labor. It would tend to transfer investment decisions from successful business people who like to grow their business to politicians who like to redistribute.

roywiggins 8y ago
The linked article specifically argues that it would not hurt the economy. My question was how does it "kill motivation" to make money, really.
- hirundo 8y ago
  To the extent that people are motivated to make money the prospect of making less of it reduces their motivation.
  - deleted 8y ago
    [deleted]
- jquery 8y ago
  The linked article does a poor job of convincing skeptics, it only looked at nominal rates, not effective rates, and additionally confused the issue by looking at the first derivative of the top marginal rate. Finally, it didn’t even fix the marginal rate to an exchange-rate fixed income ceiling across countries. Sloppy methodology with a conclusion in search of evidence.

atlantacrackers 8y ago

because people don't vote purely for self interest. Maybe you are aspirational and want to earn that much some day. Maybe you believe it best for government to be less a part of daily life than more. Maybe you think higher rates will cause successful people to look for lower rate countries to take their talents. Or maybe, you think it is morally wrong for people to vote to grab money lawfully earned from others just because they can.

roywiggins 8y ago
If we're just talking aspirations, if (1-taxes) halves, then I'll just aspire to earn double. Earning 1M a year is almost exactly as plausible as earning 2M a year for the vast majority of people.
dragonwriter 8y ago
> Maybe you are aspirational and want to earn that much some day Raising taxes on those already making that much makes it more likely, not less likely, that you will be able to do so.
- atlantacrackers 8y ago
  OP stated: Unless you're already making that much, how does a higher marginal tax rate on income over $500k affect you at all? So, if you want to make that much some day, then it would affect you when you do. Further - raising rates on high income earners makes it more likely for others to make more? That seems dubious.
  - roywiggins 8y ago
    One argument in the original article is that an awful lot of that >$500k income is just non-productive rents levied on the lower income brackets anyway, so discouraging wasteful rentier behavior is a net positive (as it reduces inequality) without reducing productivity at all, since rents by definition aren't productive, they just siphon money into top earners' pockets rather than growing the economy at all. Decreasing rent-seeking in top earners will leave more money on the table for everyone else.