Astrid Lindgren, who you might now as the author of Karlsson-on-the-Roof and Pippi Longstocking children books, once was unlucky enough that she had to pay 102% of her income in taxes (yes, paying more than she had earned this year). Things got better since then, but I would totally understand the desire to evade arbitrarily-imposed taxes.
For example, I've had to pay taxes for funds that were formed in 2016, but the tax starts in 2013, which means that if you completely paid all your taxes for 2015, in 2016 you suddenly owe three years of a tax that was voted in just that year.
No it does not mean that. It's a marginal tax rate, not an effective tax rate.
I'm not familiar with the author's situation but standard marginal rate assurances stop applying when the tax rate exceeds 100%.
Isn't a progressive tax system basically the opposite of an arbitrarily defined system? Perhaps you can quibble over where each progressive quantile is delineated, but a system defined by raising taxes on those who make the most is not an arbitrary one. In fact it's a system based on determined reason. Just because you disagree doesn't make it arbitrary.
Such would establish an income level above which it becomes more desirable to reduce one's taxable income rather than pursue additional income. Every additional euro would go to the state, plus a 2% fee for having the audacity to earn more money when you already earn too much.
Assuming there is a deduction for charitable contributions, that's when you direct your accountant to dump any unexpected windfalls into your favorite charity, so that you save that 2%. Or, more cynically, you might direct your company to reduce its dividend and spend some extra money on an executive retreat.
I can see how a 102% marginal rate might seem reasonable to an insane person. But I think the highest marginal rate you can charge without causing unexpected bizarre avoidance behaviors [that may spill over onto other people] is probably 50%.
So to correct my statement: make a million, pay 35% (averaged out over different tax rates) on the first €XX.000, and then lose half of the remaining €XXX,000.
Is that supposed to make it better?
e.g. Higher rate income tax in the UK is 40% for income over £45K (to £150K). However with capital gains tax with things like taper relief you can end up paying 10%.
Just pointing out that having income taxes that are too high is often counterproductive for society, just because they can easily be avoided by the wealthy. I guess the differentiation (and justification) is mostly a way to make sure the masses who actually use the infrastructure pay more than the one wealthy person who uses it, but don't need it as much.
I am not proposing that any nation institute a 50% marginal tax rate. I am just saying that I believe that any nation that tries to go higher than that is guaranteed to have tax avoidance schemes that ensure no one ever actually pays that much, whether those schemes are visible to the taxing authority or not. Some people will jump through a maze of hoops just to avoid a 0.1% tax.
What I'm saying is that nobody would rationally submit to a scheme wherein they do all the work and someone else reaps the majority of the benefits from it. It goes beyond the limits of the human sense of fairness. A 102% marginal tax rate is so far beyond that, I cannot even imagine circumstances that might lead to anyone actually paying it.
https://en.m.wikipedia.org/wiki/Income_tax_in_the_United_Sta...
http://ablog.typepad.com/.a/6a00e554717cc988330147e220e3f997...
It is an exceptional situation, but its also a possibility. Greater-than-income taxes aren't simply unreasonable.
Punishing capitalists for creating wealth is just stupid. Let's say you live in country X, and country X does this. Generally there are sufficient ways for wealthy people to avoid being taxed at 102%.
However, in the case where they would in fact have to pay such ridiculous tax rates, they would either: 1) stop working and investing and just live off of their capital, to be exempt from the tax (not great for the local economy + because what's the point / why would I risk my money?); or 2) leave (even worse).
Personally I'm not a believer in that wealthy people will easily relocate when taxes are raised, but in this case, I do believe they would. There's a certain cutoff point where it just gets unacceptable and it becomes a no brainer.
People also don't evade taxes because they feel personally slighted. People evade taxes because the ROI on doing so is positive. Because they can, and because they won't go to jail for it.
Did you say that backwards? The value of a dollar to someone in poverty is much higher than the value of a dollar to Bill Gates.
You rob banks because that's where the money is, not because you feel like the bank can more easily handle the loss.
Raising the bottom marginal rates produces far more additional tax revenue that raising the top ones.
1. The difference between marginal tax rate and effective tax rate. 2. The key motivating reason for a progressive tax policy vs. a flat tax.
[0] https://en.wikipedia.org/wiki/Pomperipossa_in_Monismania
It's still an incredibly high marginal rate, but is nowhere near as crazy as the implied 102% effective tax rate.