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Comment by jtlienwis | Hacker News Reader

If you frame it as a simple question, then sure almost everyone would say tax someone else at a high rate and they will assume they will pay less tax. But, if you go by how it actually will work out in the real world... Ask if you support a 70% tax on the highest incomes, if it results in less tax being collected on high incomes and MORE being paid by the lowest incomes, then it probably would not get such a high percentage. Need to lower the tax rate for higher earners, so that everyone works harder, pays more tax and yet gets themselves into a LOWER bracket. If you want to tax something, tax luxury goods and contributions to political candidates.

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The motivation is the money, not the rate of taxation on your income above a certain threshold. People still work to be somewhat richer even if there's a headwind. History and logic demonstrate this. The point at which the rich say "meh, screw it" is short of 100%, but it's not like we need a regressive set of tax tables to get people to work.

There are different sets of motivations for different people.

Saying this differently and with purposefully fake numbers, if (at your current pre-tax income) increasing your income by 50% would only give you 5% of that in cash you can use, would you really do that? Or do you have alternative use of your time (like leisure) that would give you more happiness?

You may say you would, but the reverse calculation then applies: if you would lose 5% extra cash by cutting your pre-tax income by 50%, wouldn't you do it? Many people would. Just look at the number of people who want to work 4 days or less.

Of course this assume income is a function of time spent working but it is very often the case.

The resulting elasticity will be different for everyone, but there will be a non null elasticity at the population level.

I don't see where we disagree.

We disagree in that at any non 0% tax rate, some people will respond by adjusting the amount of work supplied.

The effect may only be measured at the population level to take into account the difference between people, even if we can predict it is likely to be very low close to 0% and very high close to 100

Yes, but it is important to close the tax loopholes first. Because it is also quite logical to spend 10% of your income on a fancy tax expert if they can save you an extra 11% on taxes.

That work is of little value to society or the government.

The U.S. marginal tax rate in 1960 was 91%

Yes, but the _effective_ tax rate was only about half that, 49%-ish, because there were so many exemptions.

> because there were so many exemptions.

The effective tax rate was lower primarily because 91% was the top marginal tax rate. Even those who paid the top marginal rate still had most of their income taxed at lower marginal tax rates, just as it is today.

Also, a large number of exemptions still exist today.

It used to be that all interest was deductible.

This seems ripe for tax evasion. Two parties could loan each other the same amount, through different shell entities, and both could deduct the interest on the payments to the other.

Piketty’s paper [1] gives a break out of U.S. tax 1970 vs. 2004. It looks like this proposal would effectively return the U.S. to postwar pre Reagan era norms? If I’m reading the table correctly the effective rate in 1970 for the highest bracket is 74.6%.

[1] https://eml.berkeley.edu/~saez/piketty-saezJEP07taxprog.pdf

> they will assume they will pay less tax.

[citation needed]

Imagine how much the conversation would shift if we instead focused on increasing tax revenue, rather than increasing tax rates.

An alternate shift could be to focus on decreasing expenses. There is A LOT of bloat in the US budget, but it's rarely ever even referenced because so much of it is political poison to some subset of constituents.

I completely agree. I was just trying to avoid getting up on a soapbox :)

Or decreasing the deficit? Last time we managed to balance the budget was under Bill Clinton.

I completely agree. And as far as I know, the Clinton balanced budget was kind of a red herring. I'm sorry I can't remember where I had run into that. Doesn't change your point, and at least it was something they considered useful as a political goal. Unlike now.

Clinton was definitely riding a bubble, but at the same time he didn't introduce a giant giveaway to billionaires the same way Bush Jr and Trump did. So it's not so much that he created the situation as he didn't screw it up.

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