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The idea that a 91% top marginal tax rate would stifle investment or innovation is misleading. Sure the ultra-wealthy will always use deductions and shelters t

by Teever 2y ago

The idea that a 91% top marginal tax rate would stifle investment or innovation is misleading. Sure the ultra-wealthy will always use deductions and shelters to lower their effective tax rates, but even with those, they still paid significantly higher rates than the ultra-wealthy do today. And the economy didn’t collapse under those high rates—in fact, it grew at about 4% annually, and we built a thriving middle class. Wealthy individuals and corporations still invested because the tax code encouraged reinvestment into productive ventures like infrastructure, research, and business expansion rather than hoarding wealth. Reagan’s reforms didn’t simply eliminate crummy tax shelters—they slashed the top rate to 28%, which kicked off a massive concentration of wealth. And the idea that the wealthy always reinvest their money into productive ventures is a just-so story that is more myth than reality. A lot of that wealth today goes into stock buybacks, speculative assets, and offshore accounts that don’t create jobs or grow the economy. Musk and his ventures are a terrible example. SpaceX and Starlink wouldn’t exist without billions in government contracts and subsidies. Public money was a huge driver of their success, not just private capital. The idea that lowering taxes for the ultra-wealthy benefits everyone just doesn’t hold up to scrutiny. But let's flip things, What tax rate do you think the ultra-wealthy should be subject to? Why that number? Personally, I don't claim to know enough about economics to be certain about this but I feel that the 1950s-1960s in America was a time of great growth for the middle class and government funded technological development and that the tax policy of the time likely played a large part in that.

WalterBright 2y ago
> The idea that a 91% top marginal tax rate would stifle investment or innovation is misleading. If you make $100,000, at a 91% tax rate you'd have $9,000 left over to invest. If you are taxed at 28%, you'd have $72,000 left to invest. $72,000 is greater than $9,000. > And the economy didn’t collapse under those high rates Right, because they weren't actually paying those rates. > hoarding wealth The wealthy do not hoard wealth. There are no Scrooge McDuck cash vaults. All their money is invested, not hoarded. If you tax the money away, it is no longer invested. > kicked off a massive concentration of wealth Wealth creation is not "concentrating" wealth. Wealth is not a fixed pie. Musk did get government contracts for rockets. If he hadn't successfully delivered the goods, he wouldn't have been paid. Those rockets also cost 10% of what it would have cost NASA otherwise. A government contract is not a subsidy. SpaceX and Starlink were not subsidized. I subscribe to C. Northcote Parkinson's observation that a 10% flat tax makes for the most prosperous economy while providing sufficient funding for the government. (He's mainly remembered for Parkinson's Law.) > A lot of that wealth today goes into stock buybacks, speculative assets, and offshore accounts that don’t create jobs or grow the economy. They do, except for offshore accounts, which benefit other countries. (All investments are speculative.) Stock buybacks are also investments.
- Teever 2y ago
  > If you make $100,000, at a 91% tax rate you'd have $9,000 left over to invest. If you are taxed at 28%, you'd have $78,000 left to invest. $78,000 is greater than $9,000. This is a misunderstanding of how marginal tax rates work. A 91% marginal rate only applies to income above a very high threshold. In the 50s and 60s, that rate didn’t kick in until income hit around $2 million in today’s dollars. So no, someone making $100,000 wasn’t being taxed at 91%. And the ultra-wealthy still had plenty of money left over to invest after deductions and shelters, which is why the economy grew so well. > Right, because they weren’t actually paying those rates. True, but they were still paying effective rates that were much higher than today’s ultra-wealthy. The top 0.01% today often pay effective rates around 20%, while back then, even after deductions, they were paying closer to 50-60%. That’s a big difference, and it contributed to a more equitable economy. Do you think that the economy is healthier today and that this is a result of the current tax policy? > The wealthy do not hoard wealth. There are no Scrooge McDuck cash vaults. All their money is invested, not hoarded. If you tax the money away, it is no longer invested. This is a cute image, but “hoarding” doesn’t mean stuffing cash under a mattress. Hoarding happens when money is funneled into assets that don’t circulate productively in the economy—things like luxury real estate, golf courses, art, or stock buybacks that inflate share prices without creating value. Investing in financial instruments that primarily benefit the ultra-wealthy doesn’t generate the kind of broad-based economic growth that happens when money flows through the middle class. > Wealth creation is not “concentrating” wealth. Wealth is not a fixed pie. True, but wealth concentration is still a problem. While wealth isn’t a zero-sum game, extreme concentration reduces economic mobility and slows down overall growth. When too much money pools at the top, it reduces aggregate demand, which is what drives a healthy economy. If you don't think that this is a problem with current levels of wealth distribution, what levels of wealth inequality would we have to see for you to consider a problem? > A government contract is not a subsidy. SpaceX and Starlink were not subsidized. This is semantics. SpaceX received millions in government contracts before proving its capabilities. Early-stage government money often functions as a de facto subsidy, reducing risk for the private sector. NASA essentially de-risked SpaceX’s early development, and without that, it’s unlikely SpaceX would have succeeded. Government contracts don’t magically appear out of nowhere—someone took a bet on Musk, and it was with taxpayer money. I think that's great, but we should have more tax money to make these kinds of bets and we can get that money by having higher taxes on the ultra-wealthy. > I subscribe to C. Northcote Parkinson's observation that a 10% flat tax makes for the most prosperous economy while providing sufficient funding for the government. A 10% flat tax? That’s fantasy land. It’s a cute theory that ignores the realities of modern economies. Flat taxes disproportionately burden the poor and middle class while letting the ultra-wealthy off the hook. There’s a reason no prosperous nation has implemented a flat tax at that level and maintained the kind of infrastructure, education, and public services necessary for sustained growth. Even Estonia, often held up as a model of flat taxation, doesn’t follow that script. Estonia’s system isn’t a pure flat tax—there’s a 20% flat income tax plus a 33% payroll tax for social services. And importantly, Estonia relies heavily on VAT (value-added tax), which disproportionately impacts lower-income households. > Stock buybacks are also investments. Not really. Stock buybacks are often a way to boost share prices and executive bonuses. They don’t add productive value to the economy or create jobs. In fact, before 1982, they were considered a form of market manipulation and were illegal.
WalterBright 2y ago
P.S. Income tax is based on income. If the wealthy were hoarding money, they would realize no income and no taxes will be collected. To generate income, the money has to be invested.

by Teever 2y ago

WalterBright 2y ago

> The idea that a 91% top marginal tax rate would stifle investment or innovation is misleading. If you make $100,000, at a 91% tax rate you'd have $9,000 left over to invest. If you are taxed at 28%, you'd have $72,000 left to invest. $72,000 is greater than $9,000. > And the economy didn’t collapse under those high rates Right, because they weren't actually paying those rates. > hoarding wealth The wealthy do not hoard wealth. There are no Scrooge McDuck cash vaults. All their money is invested, not hoarded. If you tax the money away, it is no longer invested. > kicked off a massive concentration of wealth Wealth creation is not "concentrating" wealth. Wealth is not a fixed pie. Musk did get government contracts for rockets. If he hadn't successfully delivered the goods, he wouldn't have been paid. Those rockets also cost 10% of what it would have cost NASA otherwise. A government contract is not a subsidy. SpaceX and Starlink were not subsidized. I subscribe to C. Northcote Parkinson's observation that a 10% flat tax makes for the most prosperous economy while providing sufficient funding for the government. (He's mainly remembered for Parkinson's Law.) > A lot of that wealth today goes into stock buybacks, speculative assets, and offshore accounts that don’t create jobs or grow the economy. They do, except for offshore accounts, which benefit other countries. (All investments are speculative.) Stock buybacks are also investments.

Teever 2y ago
> If you make $100,000, at a 91% tax rate you'd have $9,000 left over to invest. If you are taxed at 28%, you'd have $78,000 left to invest. $78,000 is greater than $9,000. This is a misunderstanding of how marginal tax rates work. A 91% marginal rate only applies to income above a very high threshold. In the 50s and 60s, that rate didn’t kick in until income hit around $2 million in today’s dollars. So no, someone making $100,000 wasn’t being taxed at 91%. And the ultra-wealthy still had plenty of money left over to invest after deductions and shelters, which is why the economy grew so well. > Right, because they weren’t actually paying those rates. True, but they were still paying effective rates that were much higher than today’s ultra-wealthy. The top 0.01% today often pay effective rates around 20%, while back then, even after deductions, they were paying closer to 50-60%. That’s a big difference, and it contributed to a more equitable economy. Do you think that the economy is healthier today and that this is a result of the current tax policy? > The wealthy do not hoard wealth. There are no Scrooge McDuck cash vaults. All their money is invested, not hoarded. If you tax the money away, it is no longer invested. This is a cute image, but “hoarding” doesn’t mean stuffing cash under a mattress. Hoarding happens when money is funneled into assets that don’t circulate productively in the economy—things like luxury real estate, golf courses, art, or stock buybacks that inflate share prices without creating value. Investing in financial instruments that primarily benefit the ultra-wealthy doesn’t generate the kind of broad-based economic growth that happens when money flows through the middle class. > Wealth creation is not “concentrating” wealth. Wealth is not a fixed pie. True, but wealth concentration is still a problem. While wealth isn’t a zero-sum game, extreme concentration reduces economic mobility and slows down overall growth. When too much money pools at the top, it reduces aggregate demand, which is what drives a healthy economy. If you don't think that this is a problem with current levels of wealth distribution, what levels of wealth inequality would we have to see for you to consider a problem? > A government contract is not a subsidy. SpaceX and Starlink were not subsidized. This is semantics. SpaceX received millions in government contracts before proving its capabilities. Early-stage government money often functions as a de facto subsidy, reducing risk for the private sector. NASA essentially de-risked SpaceX’s early development, and without that, it’s unlikely SpaceX would have succeeded. Government contracts don’t magically appear out of nowhere—someone took a bet on Musk, and it was with taxpayer money. I think that's great, but we should have more tax money to make these kinds of bets and we can get that money by having higher taxes on the ultra-wealthy. > I subscribe to C. Northcote Parkinson's observation that a 10% flat tax makes for the most prosperous economy while providing sufficient funding for the government. A 10% flat tax? That’s fantasy land. It’s a cute theory that ignores the realities of modern economies. Flat taxes disproportionately burden the poor and middle class while letting the ultra-wealthy off the hook. There’s a reason no prosperous nation has implemented a flat tax at that level and maintained the kind of infrastructure, education, and public services necessary for sustained growth. Even Estonia, often held up as a model of flat taxation, doesn’t follow that script. Estonia’s system isn’t a pure flat tax—there’s a 20% flat income tax plus a 33% payroll tax for social services. And importantly, Estonia relies heavily on VAT (value-added tax), which disproportionately impacts lower-income households. > Stock buybacks are also investments. Not really. Stock buybacks are often a way to boost share prices and executive bonuses. They don’t add productive value to the economy or create jobs. In fact, before 1982, they were considered a form of market manipulation and were illegal.

WalterBright 2y ago

P.S. Income tax is based on income. If the wealthy were hoarding money, they would realize no income and no taxes will be collected. To generate income, the money has to be invested.