Hacker News Reader

Comment by judk | Hacker News Reader

Higher taxes on the wealthy will reduce wasteful spending.

I'd argue it isn't the wealthy buying disposable goods. They have the money to buy the good stuff. If any demographic is buying more often than the other, it's actually the poor, who don't have the money to spend $1,000 for a blender that may last.

Right or move to a sales tax that discourages consumption. Instead of an income tax that discourages working.

Taxes on income don't reduce working any more than the price of insulin affects how much a diabetic needs.

If your taxes go up 5% tomorrow, would you work 5% less?

I think over the long term it would affect my decision, yes.

Please explain this reasoning? Do you have any direct evidence this would be the case, in a general sense and not just personally? Income taxes in the US were the highest they've ever been in the 50s, 60s, and 70s and those were some of the most productive decades in this country's history.

This is just false.

Even Slate, which is hardly a right-wing bastion, concedes that there is an effect (http://www.slate.com/articles/news_and_politics/explainer/20...)

If we subjected you to a 99% tax rate tomorrow, would you work less than before? A yes answer is all that is needed to concede the point theoretically. Then, we're just arguing about magnitude. And I just don't believe you if you answer no: Who is going to work a full-time $50,000 a year job when they're only taking home $500/year?

For further reading, Paul Graham has argued that redistribution through higher tax rates leas to less entrepreneurship (http://www.paulgraham.com/inequality.html)

If you suddenly went from a 30% to 40% tax rate, couldn't you imagine working more to make up the difference? There is a lot of social pressure to maintain lifestyle. American wages have stagnated since the 70s and people are working longer hours than ever.

To answer your question honestly, it's going to depend on how much disposable income I have.

If I'm making enough to pay for all of my needs and wants after the rate goes up, then I'll probably work less... Because what's the point?

If the difference is whether I can pay rent or not, then I'll probably work more.

This argument assumes that there is a monotonic effect of taxes on my desire to work. I'd argue that if taxes were raised a little, I would work a little more. I think therefore that it is more reasonable to assume that the taxes->work hour function is concave.

I'm willing to concede that the effect is uncertain at low and middle incomes, but I think it has been shown quite convincingly that when tax rates go up the rich work less.

Reported income is not comparable to effort or economic activity.

The Slate article states that when income tax rate increases, the rich report less income, by fudging their taxes. It says nothing about rich people expending less effort.

You should read paragraph number 5 again. It concedes that at least 25% of the reduction in reported income is due to working less.

Yup. One of the options for a middle class couple is the non breader winner of a middle class couples could decide to work less.

I reread your comments (upthread). I imagined you were trotting out the "discouraged rich people" trope. My apologies.

Well, to be fair to you, I was trotting out the discouraged rich people trope.

It's rich people who have the most elastic working hours and income.

Isn't consumption what drives the huge American economy? I'm not an economist, but it seems like implementing a bigger sales tax would reduce consumption, which would reduce profits, which would results in less jobs and smaller salaries. So in effect you would be reducing take home pay and increasing the price of goods. Is my logic here incorrect?

The need for more pervades everyone, it is not a matter of "I have spare cash, lets spend it!", our society revolves around the accumulation of crap. It is a broad cultural change that is needed, not a tax code tweak.

Reply on news.ycombinator.com