Hacker News Reader

Comment by lanevorockz | Hacker News Reader

More taxes is always good, can’t wait for 100% taxes so I can use my gucci bag voucher while playing ps5 at home

The absurdity of this comment is actually useful because it forces you to question how much is too much.

What a reductionist view of things. No one serious is arguing for that.

Top marginal income tax rates in many countries now exceed 50%, not even considering payroll tax, property tax, sales tax, etc.

The question is: how can anyone seriously support tax rates that high? After a certain level, more than half your time is spent working for the government - failure to pay means fines and possible jail time. This is serfdom.

Higher corporate tax rates should not be applauded by anyone. Higher corporate tax rates invariably increase cost of living because companies can simply raise prices to compensate. If all of your competitors have to pay the same (higher) tax rates as you, the correct game theoretic move is for everyone to simply bake the higher tax rates into the price of their products/services.

Almost all forms of taxation ultimately impact the middle class in one way or another, either directly or indirectly. So while nobody is "seriously arguing" for, say, a 70% top marginal tax rate, it's easy to get there when you actually look at the entire tax burden across all levels of government, including price increases caused by higher tax rates.

> Top marginal income tax rates in many countries now exceed 50%

You mean, for people right? I have never heard about any place that taxes anywhere near 50% of a corporation revenue, but yeah, it's not rare to find places that tax more than 50% of a worker's income (all taxes in, if you are talking exclusively about income tax, I never heard about it either).

Why do corporations need lower taxes than individuals?

Because corporations would move.

Individuals don't move as much. So they are in a much worse negotiation position.

Shareholders and employees are people. Corporate income taxes represent a form of double-taxation because shareholders are taxed on realized gains (in capital gains or dividends), and employees are taxed on income.

Moreover, capital gains taxes are lower than income taxes because they roughly account for inflation - capital gains are typically incurred on long-term appreciation on assets, and if you're holding something for, say, 10 years at 2% annual inflation you're talking about 21% inflation. So if you have a 21% capital gains rate and a 21% rate of inflation, your effective "tax" rate is really more like 42%.

This is one reason why higher corporate tax rates are generally considered to be a poor economic choice - additionally, corporations can relocate, restructure, and do all number of things to minimize taxable income, and are strongly motivated to do so as rates increase. So you don't even ultimately collect much in additional taxes this way.

Oh, and higher corporate tax rates also raise the price of the goods and services they produce, which is reflected in substantial cost-of-living increases for low and middle-income individuals. That's why it's good politics but bad economics to target corporate taxes in this way.

Between 1951 and 1963, the highest marginal tax rate in the US exceeded 90% [0]. This is a period of time generally regarded as one of booming economic growth in the US, an exceptionally good time to be in the middle class, and a time span looked upon fondly by your stereotypical American conservative.

Edit: Why do people put up with it? Because of the progressive tax system. If my choices are a) earn $517k b) earn $1m but get taxed 37% on everything over $518k, I know what I'm picking. (Numbers come from the 2020 US tax brackets)

[0] https://www.taxpolicycenter.org/statistics/historical-highes...

During the same period, only a handful of families paid that rate. There was an enormous amount of tax avoidance[0], with the real rate actually paid by top incomes under 50%[0]. When the official rate was lowered by JFK, tax receipts surged. This is the "real" laffer curve. Now it's not clear where the Laffer point is, but it's certainly to the left of 90%.

[0] https://www.latimes.com/business/la-fi-nocera-tax-avoidance-...

Economics devoid of morality is a poor governing principle, in my view. Even if 90% tax rates could be economically justified as not impacting growth (obviously not true), it is morally reprehensible because it is tantamount to indentured servitude.

Reply on news.ycombinator.com