18 ms·

Well, but that's a very different issue: the rich have an incredible amount of options to optimize their taxes that us mere mortals don't, and can shift their i

Well, but that's a very different issue: the rich have an incredible amount of options to optimize their taxes that us mere mortals don't, and can shift their income so that it doesn't incur income taxes. You don't fight that with income tax hikes or by refusing to countenance any and all tax cuts.

PaulDavisThe1st 5y ago
a 95% top marginal rate (say, on income over $1M/yr) would certainly discourage "shifting their income so that it doesn't incur income taxes". Why? Because they'd have less money that they could afford to shift around in that way.
- stdbrouw 5y ago
  Not sure if you're joking, but... the taxes on your salary are subtracted at source in most countries so there's no way to avoid them no matter how highly you're taxed, but things are quite different when you can decide what to pay yourself in salary vs. what ends up at a company you control vs. what ends up in some kind of trust, and so on and so on.
  - PaulDavisThe1st 5y ago
    I'm not joking at all. We used to have tax rates just like that. Let's say that you've got a nice little setup for yourself. $1.5M/yr in personal income, with another US$8M or so flowing into things you indirectly (in time or space) will benefit from. Now let's bump up the top marginal rate to 95% on amounts over $1M. You're personal income is reduced by an amount on the order of $400-500k per year. You're not likely to just accept that, and live on less. Instead, you're going to rearrange things so that you're back to the same "take home" personal income, while the "diversions that benefit you" drop a corresponding amount.
    - stdbrouw 5y ago
      It'd be an interesting experiment :-)
      - laverya 5y ago
        I'm not sure if you're being intentionally obtuse, but we did run that experiment, here in the US. It played out pretty much like the GP suggested.
        stdbrouw 5y ago
        It did? The paper under discussion doesn't really give an answer and first paper I can find that does, about the 1986 tax reform (admittedly it's not about the 1964 reform when top rates were even higher), states that "The estimated sensitivity implies that a change in income tax rates has substantially less impact on tax revenue than would be true if there were no behavioral response to marginal tax rates. This sensitivity of taxable income also implies that high marginal tax rates create significant deadweight losses by inducing taxpayers to act differently than they otherwise would.'" But I have no skin in this game and I'm not being obtuse, happy to learn more.

PaulDavisThe1st 5y ago

a 95% top marginal rate (say, on income over $1M/yr) would certainly discourage "shifting their income so that it doesn't incur income taxes". Why? Because they'd have less money that they could afford to shift around in that way.

stdbrouw 5y ago
Not sure if you're joking, but... the taxes on your salary are subtracted at source in most countries so there's no way to avoid them no matter how highly you're taxed, but things are quite different when you can decide what to pay yourself in salary vs. what ends up at a company you control vs. what ends up in some kind of trust, and so on and so on.
- PaulDavisThe1st 5y ago
  I'm not joking at all. We used to have tax rates just like that. Let's say that you've got a nice little setup for yourself. $1.5M/yr in personal income, with another US$8M or so flowing into things you indirectly (in time or space) will benefit from. Now let's bump up the top marginal rate to 95% on amounts over $1M. You're personal income is reduced by an amount on the order of $400-500k per year. You're not likely to just accept that, and live on less. Instead, you're going to rearrange things so that you're back to the same "take home" personal income, while the "diversions that benefit you" drop a corresponding amount.
  - stdbrouw 5y ago
    It'd be an interesting experiment :-)
    - laverya 5y ago
      I'm not sure if you're being intentionally obtuse, but we did run that experiment, here in the US. It played out pretty much like the GP suggested.
      - stdbrouw 5y ago
        It did? The paper under discussion doesn't really give an answer and first paper I can find that does, about the 1986 tax reform (admittedly it's not about the 1964 reform when top rates were even higher), states that "The estimated sensitivity implies that a change in income tax rates has substantially less impact on tax revenue than would be true if there were no behavioral response to marginal tax rates. This sensitivity of taxable income also implies that high marginal tax rates create significant deadweight losses by inducing taxpayers to act differently than they otherwise would.'" But I have no skin in this game and I'm not being obtuse, happy to learn more.