> Of course nobody has some inherent qualities that make him "deserve" enormous amounts of money, but that isn't "fixable",
It is trivially fixable, with taxes.
It is less trivially fixable via cultural changes such that in-organization compensation multiples are held below a relatively low number (I'm would lean in the range of 5-10x, but the precise value isn't as important).
> As an aside, I very much dislike progressive tax rates.
Progressive tax rates reflect the basic economic concept of the "marginal utility of money". If you earn $10k/yr, and extra $1k is a big deal, and can have profound impacts on your life. If you earn $100k/yr, an extra $1k is much less of a big deal. If you earn $1M/yr, an extra $1k is just noise.
So it is with taxes, but in reverse: the impact of taking $1k in taxes from the $10k/yr person is very large, but extremely small for the $1M/yr.
It would be preferable if we used a continuous function for this, rather than income brackets, but the concept is not hard to grasp: the impact of taxes, not the actual amount, should be the same for every $ earned. That requires progressive rates, because the impact of a 20% tax rate on the first (and only) $10k is huge, whereas the impact of a 20% tax rate on the final $10k of $1M is extremely small.
>> If you earn $10k/yr, and extra $1k is a big deal, and can have profound impacts on your life. If you earn $100k/yr, an extra $1k is much less of a big deal. If you earn $1M/yr, an extra $1k is just noise.
This an economic fallacy. It only makes sense if you believe the only utility of money is is to buy basic necessities and you can't imagine doing things that require larger amounts of capital to start.
No, it is clearly not, not ever has it functioned. It is also destructive to do.
>Progressive tax rates reflect the basic economic concept of the "marginal utility of money".
I know, but so what? The exact same goes for constant rates.
>If you earn $10k/yr, and extra $1k is a big deal, and can have profound impacts on your life. If you earn $100k/yr, an extra $1k is much less of a big deal. If you earn $1M/yr, an extra $1k is just noise.
Why are you arguing against some fantasy? Nobody pretends to want taxes as a fixed amount. That is some absurd thing you just made up. Why even reply if you make this bad faith arguments?
You even completely ignored my argument about progressive taxes devaluing work. As your hourly rate sinks with amount worked.
>It would be preferable if we used a continuous function
> No, it is clearly not, not ever has it functioned. It is also destructive to do.
Most people would agree that the USA from about 1950-1975 functioned very well, if you can temporarily ignore the racism and sexism that made its success unevenly distributed. That was accompanied by (and partly explained by) high marginal tax rates.
You seem to either be using "progressive tax rates" to mean something different than it conventionally does, or to not understand how they work.
> As your hourly rate sinks with amount worked.
This is simply not true of progressive tax rates as conventionally defined.
> You even completely ignored my argument about progressive taxes devaluing work. As your hourly rate sinks with amount worked.
Progressive tax rates do not devalue work, they devalue excessive rates of compensation.
> Nobody pretends to want taxes as a fixed amount. That is some absurd thing you just made up
Actually, several US Republican presidential candidates over the past couple of decades have specifically proposed a flat rate of income tax.
>This is simply not true of progressive tax rates as conventionally defined.
Yes it is. It is very basic mathematics. Do you not understand how taxes work?
>Progressive tax rates do not devalue work, they devalue excessive rates of compensation.
With progressive taxes working for 30 hours instead of 40 with same hourly wage before taxes means that after taxes your hourly rate for 30 hours is higher than for 40 hours (assuming the taxes don't just align to be flat in that region). This is not debatable, it is an explicit property of progressive tax rates.
>Actually, several US Republican presidential candidates over the past couple of decades have specifically proposed a flat rate of income tax.
Are you serious? I don't want to attack you personally, but that is fourth grade math or civics you just failed.
HN requests that we avoid tone policing, but your insults are not appreciated nor necessary.
It seems that we have flown by each other with insufficiently precise terminology.
I agree that progressive taxation means that you receieve a lower after-tax hourly rate on income that puts you into higher tax brackets.
However, you continue to receive a higher after-tax income than the person who, for any reason, declined or did not perform that additional work (because the higher rate never reduces your effectively hourly rate for the last hourto zero)
Which is reflective of the precise point of progressive taxation. The dollars you earn that put you into each successively higher tax bracket would (if the brackets are designed correctly) be of less and less marginal utility to you, and thus the impact of you losing more of them to taxation is similarly reduced.
With the current tax brackets for the USA, you could annotate them as follows:
0 - 13850 : critical income, no taxation
13850 - 24850 : 13850 wasn't even livable, so you pay only 10% on any extra
24850 - 58575 : 24850 was vaguely livable, so you pay 12% on the extra
58575 - 109225: 58575 was getting comfortable, so you pay 22% on the extra
109225 - 195950: you're now firmly into comfortable life, so you pay 24% on the extra
and so on, up to:
$591975: you've already more than 0.5M in income, any more is of near zero marginal utility so we tax the extra at (shock! horror!) 37%
The alternative - a flat rate - means that every extra dollar of income (over some standard deduction) is taxed at the same rate regardless of its marginal utility. By definition, this means that people with lower incomes "feel" the tax burden much more than people with higher incomes. The "last" $1000 they earn is of significant marginal utility to them, but is taxed at the same rate as someone for whom their last $1000 is of near-zero marginal utility.
>HN requests that we avoid tone policing, but your insults are not appreciated nor necessary.
You made absurd errors in your comments and accused politicians of insane policies.
>However, you continue to receive a higher after-tax income
No. That happens under a certain subset of progressive tax systems. Specifically under bracketted systems working less might result in higher income after taxes.
>That isn't a fair way to share tax burdens.
Appealing to some notion of fairness is just stupid. Taxes do not exist to make the world fairer, they exist to fund government activities. I think punishing people for working more is pretty unfair.
The marginal utility argument is so stupid because it can be used to trivially argue against progressive tax systems. The real consequence of believing in the argument directly implies that nobody should earn more than X, for some amount of income X (like 50k) where after that the marginal utility is so low that it might as well can be given to the state to waste.
> That happens under a certain subset of progressive tax systems.
There is no tax rate system that will ever tax any income at more than 100%. If you earn an extra dollar, you may only ever take home $0.01 (because you owe $0.99 in taxes). You might even take home nothing in some hypothetical 100% marginal rate tax regime, but nobody has ever proposed a system where you owe more than $1 on any $1 of income.
> The real consequence of believing in the argument directly implies that nobody should earn more than X, for some amount of income X (like 50k) where after that the marginal utility is so low that it might as well can be given to the state to waste.
Yep, that's precisely the belief and it's well grounded in lots of research into happiness, utility and so forth. Now, as it turns out, nobody has the courage/conviction to actually impose a 100% tax rate for any income over $X, so the reality is that the tax systems at play in the real world do not in fact prevent anyone from earning more than $X. Given that even the highest rates ever imposed in western industrial democracies were far from that, this just seems like a strawman. Even at 90% (the highest US marginal tax rate), for every $1000 you nominally earn over the $X value, you take home $100, thus earning more than $X.
BTW, $X is much, much higher than $50k, but I suspect that this is just a typo on your part.
>There is no tax rate system that will ever tax any income at more than 100%. If you earn an extra dollar, you may only ever take home $0.01 (because you owe $0.99 in taxes). You might even take home nothing in some hypothetical 100% marginal rate tax regime, but nobody has ever proposed a system where you owe more than $1 on any $1 of income.
You didn't even read what I wrote. This was about income after taxes increasing when working less. Which happens in bracketted progressive tax systems.
>Yep, that's precisely the belief
I know. It is of course also the single easiest way to destroy any economy.
I really hate it if people like you just pretend to argue for something you don't really believe in.
I suspect you misread what I wrote as "a flat income tax", which is ironic since it is the terminology actually used by these candidates, even though I understand it to imply a flate tax rate.
You claimed it is "everyone pays the same amount".
>I suspect you misread what I wrote as "a flat income tax", which is ironic since it is the terminology actually used by these candidates, even though I understand it to imply a flate tax rate.
You are the one single person which doesn't understand that the politicians mean e.g. "10%". But instead you thought they meant everyone pays 1k. Just stop pretending.
Flat tax rate, not a flat fixed-amount head tax. Those are way too different things, I don't think any politician who values their livelihood would propose a head tax.
It is trivially fixable, with taxes.
It is less trivially fixable via cultural changes such that in-organization compensation multiples are held below a relatively low number (I'm would lean in the range of 5-10x, but the precise value isn't as important).
> As an aside, I very much dislike progressive tax rates.
Progressive tax rates reflect the basic economic concept of the "marginal utility of money". If you earn $10k/yr, and extra $1k is a big deal, and can have profound impacts on your life. If you earn $100k/yr, an extra $1k is much less of a big deal. If you earn $1M/yr, an extra $1k is just noise.
So it is with taxes, but in reverse: the impact of taking $1k in taxes from the $10k/yr person is very large, but extremely small for the $1M/yr.
It would be preferable if we used a continuous function for this, rather than income brackets, but the concept is not hard to grasp: the impact of taxes, not the actual amount, should be the same for every $ earned. That requires progressive rates, because the impact of a 20% tax rate on the first (and only) $10k is huge, whereas the impact of a 20% tax rate on the final $10k of $1M is extremely small.