Hacker News Reader

Comment by AlgorithmicTime | Hacker News Reader

Giving more power to the IRS is not the answer. The Fair Tax is a far better solution.

Deductions are the real "lever" that the ultra rich use, since you can lobby the feds to implement whatever you want. This is why when tax rates post WWII were "over 90%" in top brackets nobody actually paid those taxes. Ironically, in that period most people who would be subject to that tax just took sabbaticals (of sorts) and reduced their income. Contrary to popular belief, most rich people have a far higher IQ than Hollywood actors.

>...most rich people have a far higher IQ than Hollywood actors.

Not surprisingly, back when marginal rates were so high, rich Hollywood actors also hired CPAs to avoid giving 90+ percent of their income to those in power. The previous discussion on this was here: https://news.ycombinator.com/item?id=19031135

> Deductions are the real "lever" that the ultra rich use, since you can lobby the feds to implement whatever you want. This is why when tax rates post WWII were "over 90%" in top brackets nobody actually paid those taxes. Ironically, in that period most people who would be subject to that tax just took sabbaticals (of sorts) and reduced their income.

Did they not pay because they had magic deductions or did they not pay because of sabbaticals and reduced income? Because the former means it was no better than today (and income differential stats around CEO vs line-level employer suggest this is not true), but the latter is by its very nature better than today. It's literally creating more opportunity for more people to earn money? If person A isn't doing the work and making the income, person B is. So inequality will be less!

That high tax rate disincentives a small set of super-high-earners from running ever-more parts of the world? Good!

> It's literally creating more opportunity for more people to earn money? If person A isn't doing the work and making the income, person B is. So inequality will be less!

That's not how things work in reality. Whatever work Jeff Bezos decides to not do as a salaried employee doesn't get distributed elsewhere, because he derives almost no income from his salary.

The Fair Tax? Is that a massive regressive tax on consumption?

It has a credit included to make it not that regressive. Compared to tax rates in states like Texas where the poorest quintile pays way more it’s not so bad.

The complexity of the tax code is bound up in efforts to include "rebates" for different activities to offset regressive taxation events.

When someone says "simplify" the tax code - well firstly, this has never happened. A simplification is an amendment, and the tax code gets larger - they've never actually managed to shrink the size of the law there.

But then you get to decide: which exemptions and deductibles are you getting rid of? For who? Because if you want to simplify it, that's what's actually got to happen.

Reply on news.ycombinator.com