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Comment by toomuchtodo | Hacker News Reader

You're going to burn through company coffers quickly if the top tax rate is 90% at some income threshold around 7 figures ($1-9 million/year).

Precedent: http://www.politifact.com/truth-o-meter/statements/2015/nov/...

"In 1944-45, during World War II, couples making more than $200,000 faced an all-time high of 94 percent. Sanders said income tax rates under Eisenhower were as high as 90 percent. A look through the records shows that top earners in the eight years of Eisenhower's presidency paid a top income tax rate of 91 percent."

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How many people actually payed that tax rather than finding some loophole though? I remember looking this up a few years ago and almost nothing was collected from that tax bracket... too lazy to check again now.

The idea we should abandon a tax policy because people find loopholes seems absurd.

I don't think these loopholes are "found", it is more that tax policy was meant to be a feel-good measure that sounds good (to some people) after a cursory inspection but doesn't actually accomplish what is claimed.

edit: and I realize I originally used the word "found"

The idea of taking 90% tax is absurd too.

I don't feel that it is. It's a marginal tax rate, not a flat 90%.

https://en.wikipedia.org/wiki/Club_33#Origin

So what I mean is that last time they had high marginal income tax rates holding shares would simply entitle you to a number of benefits, a famous one of which is Disney's Club 33. Lots of things were available though. Yachts, ski cabins, ... Needless to say, zero tax was paid on this.

So good luck with that 90% tax rate. Not going to happen.

I'm actually in a tax bracket right now that is well over 100%. In fact, this particular tax can be as much as 12 million percent.

I got caught in this when I turned 65 and signed up for Medicare Parts B and D.

This tax is the Income Related Monthly Adjustment Amount (IRMAA). The IRMAA tax is applied in increasing levels as your income goes over certain amounts. But it's not a marginal tax like income tax brackets where the higher rate applies only to your income over the bracket, and the tax rate doesn't change for income below that.

Instead, the IRMAA tax takes a hard jump of $1216/year as soon as your income goes one penny over the line. That one penny of additional income costs you $1216 in IRMAA tax. In other words, the tax on that penny is 12 million percent.

In my case, it wasn't quite so bad. I'm about $1800 over one of the IRMAA income levels. So that $1800 cost me $1216 in IRMAA tax, but I still have to pay federal and state income taxes on the extra $1800. Add it all up, and the total tax on that income is over 100%.

It is a strange thing, and I say downright evil, that my take-home pay goes down when my gross income goes up.

It's very strange and I would argue it decreases your incentive for making more, which in turn generates growth in the economy based on spend.

That's an pointless way of expressing the percentage of taxation, and will inevitably lead to > 100% taxation, but that's not a useful way of looking at it.

Imagine an income tax model where everything less than $200k was untaxed, and everything above $200k is taxed at 20%, and tax is always rounded down towards the next cent value.

Thus $200.04 pays 0 tax, and $200.05 pays 1 cent tax. That 1 cent is '100% taxed', but given that would exist no matter what values you choose, it's not a helpful way of describing the taxation.

The idea of some of these salaries, relative to what normal people make, is even more absurd.

Why? If A agrees to pay B "absurd" salary, it's mutual interest, isn't it? Otherwise A would find someone for 0.01x for the same job - no?

What is your salary, btw? 60k for sitting in cubicle and browsing reddit is absurd for the rest 6-7e9 people, that live outside of our lucky wealthy western world.

I would argue requiring people to pay a disproportionate share of their income is absurd too.

There were massive deductions, no one ever paid 90%

A job is the means by which you convert human capital to financial capital. If taxes are raised on direct compensation, this conversion becomes less efficient. Talented executives would likely exploit opportunities to earn stock at artificially low valuations. You can do this by joining startups or private companies who typically have more flexibility with valuations. This could make public companies relatively less attractive to talent, and they could suffer as a result. To the extent that retail investors and pension funds have more access to public companies than private companies or startups, they could suffer as well.

If you theoretically limited all compensation then you would distort the market in other ways - beyond a certain amount of cash and stock compensation (taxed at confiscatory rates), I would start to optimize for things like multiple secretaries, nepotism, a massive office, and other items which wouldn't necessarily help the business.

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