Sweden Has a 70 Percent Tax Rate and It Is Fine

The result is that the average tax rate on say the 1% has actually not dropped that much: https://almostclassical.blogspot.com/2011/03/90-tax-rate-myt.... It was 40-45% in the 1950s and 1960s, and has fluctuated between 30-40% since the late 1980s.

The average American has already spent most or all of their wage before they receive it. 40 cents in taxes, 35 cents in rent, 8 cents for food, ... If they're lucky, they can spend 5 cents of that dollar on something of their choice.

Whereas if they get an extra dollar "bonus" from their job, that dollar is unallocated and they can allocate it however they want. So that extra 10 cents from the marginal dollar at a rate of 90% may be worth "more" to them than the dollar they earned at the lower base rate.

"They'd find some way of organising their affairs so that they are compensated in some manner that is not income,"

The rich will spend a lot of effort on tax avoidance and tax evasion whether the tax rate is 35% or 70%.

After: doing the housework, prices are high, also need to work to cover the higher prices, and much of the extra money goes to childcare and transportation and other work expenses

That doesn't look like "financially better off" to me. It looks more like being enslaved to landlords and corporate America.

The blog post you link (which I am attempting to read through, but the condescending first paragraph doesn't help) argues in favor of a progressive tax on the amount of consumption, which I will admit is a proposal I haven't seen before. If you can make this work logistically, it would address the problem of consumption taxes being "regressive." (So would other approaches like food stamps.) However, I don't see any discussion of how these taxes would influence the decision to consume vs. save. Is the person with $100K in income going to make the same decision in both scenarios? I would assume they'd be likely to consume more in scenario 1 and less in scenario 2, where they get taxed more as they consume more. (And they would consume even less under a progressive consumption tax.) In particular I worry about money being "lost"—instead of the $50K that has doubled to $100K being spent all in 20 years, perhaps only the $50K interest is spent or perhaps not even that because there's a disincentive to consume, and then the person lives off of investment income for the rest of their life. For the casual meaning of "regressive," I think it's politically/socially important to many people that someone who lives off passive income and chooses not to work not be in the same position as someone who works long hours and lives paycheck-to-paycheck, even if they consume the same amount - or at least that there's a meaningful route for the latter person to become the former person.

I also don't understand why Bill Gates giving $10B less to Africa doesn't count as reducing consumption. It's a use of money to exert his will on the world; I think that should count as consumption (and be taxed as a consumption tax).

If in 20 years goods have become more expensive as a result of one tax policy and not the other, there is a significant difference in the behavior of this hypothetical person, and that's a significant part of answering which policy we should choose. They may not change total consumption but they may spend significantly more money on the same basic things everyone else is spending on, and less on luxury goods/services. Or they may consume more to maintain their standard of living, and save less. (Or they may decide whether to consume more as a result of one policy or the other.)

High taxes on income at the highest bracket have the effect of reducing the number of people with a certain high income, and thereby reducing the number of people able to participate in a market for very-high-priced things. This causes downward market pressure in the price of such things - for instance, the number of people willing to pay millions for housing in a city like SF or NYC will go down, so it limits the bubbles in those cities. It meanwhile does not affect people below those brackets, which in a sense is equivalent to scaling up their incomes (and the price of goods) while leaving the rich alone.

I (and many people here, I would guess) work in an industry where our own salaries have gone up significantly, and housing prices in our hubs have gone up significantly, and e.g. minimum wage hasn't gone up proportionally. As a result we negotiate for higher compensation so we can afford housing, mostly to maintain our purchasing power and not to increase it—or in other words we're effectively devaluing the dollar as this happens. This is a problem taxes could solve, and many of us think it's a legitimate use of government taxation power. If we get taxed in a way that depresses the after-tax incomes of everyone who's competing for the same housing we are, and as a result housing is cheaper, I think we're going to notice the increased tax out of proportion to the actual tax revenue.

Consumption taxes would maybe solve this for the rental market but wouldn't be as helpful for sales; if anything we'd rush to buy even more quickly before prices go up and before we'd have to pay higher consumption taxes. I realize I'm picking a very specific example here but I think investments like real estate are what people expect the "fat cats" to be using most of their wealth on. If we reduce the gap in purchasing power between the paycheck-to-paycheck taxpayers and the fat cats, then we've achieved the "logically impossible" goal in that post. You may not be boosting consumption per se, but you are changing the prices of goods and making better products/services available to the non-rich for the same amount of consumption.

Of course none of this is convincing to the author of the post, who readily admits that "brilliant" economists disagree with him but is setting his own simplified understanding of the world.

I'm a fan of saying, first, that people did not earn their money past a certain point (my income has more than doubled since I entered tech and I am certainly not working more than twice as hard, I just joined a hedge fund instead of an unprofitable startup, and as a result I am firmly comfortable with any of these high tax brackets affecting me personally). Then you can say, we'll tax much more heavily at the point that you don't need the money to live. Then you simply don't accumulate the money needed for your children to live off passive income, and the question doesn't arise.

Given they've done everything we could reasonably expect they should, let's make sure they are made whole with the amazing good fortune the winners have received by having everyone play an honest game.

Personally, I'd expect that any anti-savings policy has a net-negative effect but that very few people would successfully link cause, effect and magnitude. At some point, people should be putting their efforts into forming and preserving capital to set up for the future.

This is how democracy works. But if collectively a people democratically decide to do something that doesn't make it morally correct.

You do have to follow the law, but what I'm saying is that we need to consider the moral implications of the law being suggested.

I see no issues with some having 1000x the wealth of others. We both probably have 1000x the average citizen in some of the poorest countries in the world. Is this a problem yes. Are we morally wrong for having that wealth, no I don't think so.

Is there a problem with the difference in power at the political level, yes, is this a moral issue yes. But I don't think taking from the rich giving to the poor solves this problem. The reason being that as we do this it tends to make the situation worse. Welfare programs tend to restrict the freedom of those on the programs more that the rest of the population and have been shown to develop a learned dependence on these programs. Even if it did work I don't see how that justifies taking so much from someone.

It's a good idea to try and level the playing field. But I don't think massive income taxes are moral and as such should not be chosen as the tool to do this.

and theft is never morally justified.

I wasn't trying to start a flame war but a discussion on the morality of taking such a high percentage. I knew very well that this a marginal rate but still after some level of earnings they're suggesting taking 70% of someone's income. I just think that's far too high to justify.

topher515 has provided an interesting link to a well thought out and articulated article. That while I don't agree with it entirely I do think that sort of thing is a sign of a fruitful discussion.

The position "tax is theft" is hard to justify but I'd say the other extreme where a 70% marginal tax rate is suggested is also hard to justify.