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The point is that the work incentives are diminished at your high income. The value you are creating that is being compensated for at ~$250k hits a glass ceilin
by abossy 18y ago
The point is that the work incentives are diminished at your high income. The value you are creating that is being compensated for at ~$250k hits a glass ceiling. You aren't exactly losing money, there's just no point in working more at your highly specialized profession.
The author of the original article doesn't quite understand this point.
A blog post by (right-wing) Harvard professor Greg Mankiw clearly explains this: http://gregmankiw.blogspot.com/2008/10/blog-post.html http://gregmankiw.blogspot.com/2008/10/blog-post.html
- cedsav 18y agoThe higher your income, the lower your work incentive should be anyway (regardless of tax situation). You can afford to slow down and enjoy life. I don't believe that people change their work habit, or choose to work less, just because of a relative tax increase. However, they may be more inclined to find more tax efficient schemes.
- anamax 18y ago> You can afford to slow down and enjoy life. You're thinking of it from the wrong side. You want these people to work hard and long because they're good at what they do. You benefit from their work. You don't benefit as much from their vacation.
- cedsav 18y agoI don't disagree with that. I'm just doubtful about this particular tax issue having a real impact on people willingness to work more or less
- jrockway 18y agoYeah, I'm sure glad these people were buying subprime mortgages instead of taking a vacation.
- anamax 18y agoHuh? Folks earning around $250k and thinking about cutting back are not the folks who got subprime mortgages.
- razzmataz 18y agoMaybe money is the wrong motivator in this case...
- shader 18y agoThat particular disincentive is already handled properly by the decreasing marginal value of money. Unfortunately, taxes add even further pressure. Most people won't change their habits, but it is always the marginal earner who has to decide Do I work x% harder for x% less money?
- anewaccountname 18y agoBS. Money's marginal value goes down the more you have--your 1st house is worth more to you than your Nth super car. After around 500k net worth, money is more about status and ranking than anything else--something that happens to be preserved under a graduated tax. The only other thing it is good for is perhaps real estate closer to a waterfront, a fancy downtown, etc.; under a graduated income tax that stays pretty much the same because there isn't as much money to be spent on it. Most of the value is in the land, not the construction.
- abossy 18y agoDisclaimer: This comment post is bordering on a politic debate. Don't read below if you don't want to get involved. :) Sure, I'll agree that the percent of your net income that is spent on necessities is continually decreased as your income increases. This is definitely true. I'll go one step further and say that taxes probably don't largely effect human behavior. If I have worked hard enough to earn $250k/year, it's due to some intrinsic motivation, not the benefits of that salary in the US tax code. However, if America was built on encouraging the masses to converge on an average income, then it wouldn't be America at all. This country stands above the rest because of its tremendous wealth. It's built on incentives of self-interest. It's the ability to create unbound wealth that attracts the most brilliant minds to this country, and everybody else reaps the benefits. We should be encouraging these people to work, not take a vacation because added tax pressures are further reducing the value of their work. This is particular relevant to the entrepreneurial crowd of Hacker News; entrepreneurs are, after all, responsible for 0.2% of the country's input and 17% of its output.