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>make more money, but create far less value. If the market structure doesn't allow reaping profit proportional to the value you create, the less profitable thi
by ovi256 7y ago
>make more money, but create far less value.
If the market structure doesn't allow reaping profit proportional to the value you create, the less profitable thing doesn't get done, even if it creates more value for society. It's a market failure.
The implications of that for progressive personal income taxation are left as an exercise for the reader. They're usually not explored for ideological reasons.
- Dylan16807 7y ago> The implications of that for progressive personal income taxation I don't think there are any. An individual doesn't get to choose between a high tax job and a low tax job. The only way to get more money in your pockets is to get paid more money, regardless of whether you're taxed at 15% or 50%.
- ovi256 7y ago>more money in your pockets is to get paid more money Sure, I agree with you on that. You have to consider the effects on an additional unit of effort put in at that job. Progressive taxation sets up steeply diminishing returns on that marginal effort. And incentives to spend that effort on alternatives with better returns, like shopping for tax-sheltered investments. Because a salary's not the only income professionals have. So you can effectively make tradeoffs between revenue streams with different tax rates, one of which happens to be your job. This clearly disincentivizes creating additional value for society through an additional unit of effort at that job, and it's a result of market structure.
- Dylan16807 7y agoWhat revenue streams does someone have that don't count as income and take a notable amount of time input? Most investments don't take any significant amount of time to set up. And it's likely that whatever they're doing to get money should simply be counted as income too. > This clearly disincentivizes creating additional value for society through an additional unit of effort at that job Whatever they do instead might create less value for society, or it might create more value for society. I have no idea what the average is. Also we have to look at the opportunity cost. By taxing one person with a huge income more, you can tax dozens of people with lower incomes less. In most cases that's a huge boon for society. > Progressive taxation sets up steeply diminishing returns on that marginal effort. Steeply? Bah. When you're talking about millions of dollars, removing 37 percent (or 50 or 70) still leaves an enormous incentive. The thing that actually causes significant diminishing returns is that every dollar you earn benefits your life less than the previous dollar.
- ovi256 7y ago>you're talking about millions of dollars I never meant millions of dollars. This argument applies to middle class incomes too.
- Dylan16807 7y agoMiddle class income is below 37 percent marginal tax in the US, and they're not super high anywhere I'm aware of. "steeply diminishing returns" definitely does not apply.
- nicoburns 7y agoThere are: wealth inequality (caused by income inequality) causes massive inefficiencies in the market (by for example incentivising wasteful luxury housing), because it means that buying power is not even close to proportional to genuine need. Thus we ought to massively increase taxation on the highest earners in order to rebalance our economy.