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Comment by neogodless | Hacker News Reader

"You get what you incentivize."

If you want efficient production, you don't tax production. You tax consumption. While I may personally think million dollar paychecks are silly, and that the value created doesn't align with the compensation, I'm not convinced that increasing taxes along with income (i.e. loosely correlated with production) is the way to go. Instead, tax consumption.

In other words, if you're going to get taxed all to hell to buy a pointless yacht and $250 million homes, you might not want to do that, quite as much, so you might not care as much about making an extra $20 million, so you might not negotiate such an obscene paycheck. (Maybe you'd even care more about the value you bring to the table and the humans in the picture.)

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History tells a different story. When the income tax was first implemented it was not long ere any income over one million dollars was 100% taxed. During Eisenhower's two-terms in the 1950s the top tax bracket was 75%. It is interesting to consider that when the modern conservative wants to return to the American prosperity of the 1950s if, like you, conservatives would be willing to return to Eiesenhower's tax brackets and tax production.

A better historical argument can be made that America should have never switched from a dividends approach to the stock market during the late 1970s. Our current system rewards quarterly gains for long term losses and this has lead to the various bubbles. I can easily argue we should return to Eisehower tax brackets and also a dividends approach to stock market gains and in doing so history is on my side.

That is interesting. I don't know if "what worked then will work now," but I'm definitely not sure of any theories about taxation! Human behavior and motivation continue to surprise us. Of course, arm chair philosophy about taxation is unfortunately ineffective in affecting policy change!

There is a huge difference between top marginal rates and actual effective tax rates. Since 1950, federal taxes have consumed 17 to 20 percent of GDP in taxes. Most economists are opposed to very high marginal tax rates though due to the inefficiencies they introduce - compensation being moved to non-salary, money wasted on CPAs, lawyers and lobbying congress for special deductions, dead weight losses for economic activity that isn't done, etc.

Currently the effective rates are fairly close to the past for high wage earners, lower for low wage earners.

>...In 1958, approximately two million filers (4.4% of all taxpayers) earned the $12,000 or more for married couples needed to face marginal rates as high as 30%. These Americans paid about 35% of all income taxes. And now? In 2010, 3.9 million taxpayers (2.75% of all taxpayers) were subjected to rates that were 33% or higher. These Americans—many of whom would hardly call themselves wealthy—reported an adjusted gross income of $209,000 or higher, and they paid 49.7% of all income taxes.

>In contrast, the share of taxes paid by the bottom two-thirds of taxpayers has fallen dramatically over the same period. In 1958, these Americans accounted for 41.3% of adjusted gross income and paid 29% of all federal taxes. By 2010, their share of adjusted gross income had fallen to 22.5%. But their share of taxes paid fell far more dramatically—to 6.7%. The 77% decline represents the single biggest difference in the way the tax burden is shared in this country since the late 1950s.

http://www.wsj.com/articles/SB100014241278873247051045781516....

"There is a huge difference between top marginal rates and actual effective tax rates. Since 1950, federal taxes have consumed 17 to 20 percent of GDP in taxes. Most economists are opposed to very high marginal tax rates though due to the inefficiencies they introduce"

Most economists who say that are responding to incentives.

It's a rare economist who would admit in the same breath that this 'inefficiency' coincided (not coincidentally either) with the highest growth rate in recent American history.

And if you want to start a yacht building economy, remove those taxes on yachts and those with the means will buy your country's yachts.

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