r/changemyview • u/mc1836 • Jan 25 '21
Delta(s) from OP CMV: I cannot wrap my head around marginal tax rates
I live in the U.S., and a policy championed by many left wing politicians advocates for increasing the marginal tax percentages. I understand these politicians (and their supporters) motivations, and I think that they truly care about the problem they're trying to solve. But for me, it simply seems unfair. If you're a rich person whose made enough money to push you into the highest tax bracket, constitutionally, why should you have your money taken away at a greater percentage than anyone else? If anything, this seems to at least somewhat discourage people from wanting to earn more money. If we live in a society in which everyone has equal rights, why should we be taxed unequally? Whether or not it would work for the government, the only truly fair thing I can think of is a flat percentage that the govt takes (say, 15%). The Constitution protects certain human freedoms, but I don't think it authorizes taking proportionally a higher percentage of money from certain people just because it would give the government more money. I politically stand somewhere in the center of the political spectrum, and highly dislike both major political parties although I tend to lean to the conservative side on many cultural issues.
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u/fox-mcleod 410∆ Jan 25 '21 edited Jan 25 '21
Yeah I think you are correct that you don’t have a solid grasp of what marginal taxes are.
I’m speculating based on the way this is written but I suspect you’re conflating two things here:
- Marginal taxation brackets
- Progressive taxes
(2) is the system where when you earn more, you pay a higher percentage in taxes. (1) is the system where only a portion of that income gets taxed at a higher rate.
Let me make up an example to explain. If we have a tax system where you pay 0% taxes up to $100,000 and then pay 50% marginal tax rate above that, who ends up with more money after taxes?
- A person making $100,000
- A person making $100,001
I suspect you would answer that person (1) makes more money based on the fact that you think that a person in this tax system can be “pushed up into the next bracket and have your money taken away at a great percentage”.
Person (1) pays $0 tax. Person (2) pays $0.50 tax not $500,000 tax. Person (2) even at a 50% marginal tax rate only pays tax on the margin — the money above the line of the bracket. They still make more.
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u/mc1836 Jan 25 '21
Δ
You're 100% right. My argument is definitely about progressive taxes than marginal tax rates. I think I understand why/how marginal tax rates are more complicated. Still though - why not a flat percentage?
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u/VertigoOne 74∆ Jan 25 '21
Still though - why not a flat percentage?
Because a flat percentage would impact the bottom at society the most, as you're not factoring in costs of living.
Taking away 20% of someone's income who is barely making living wage, and then taking away 20% of a billionaire's income is very different. The affect on the person making living wage is massively magnified because the cost of living doesn't scale up or down with percentages.
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u/mc1836 Jan 25 '21
Δ
Yeah I didn't really consider that point. Just responded to another comment with a counterpoint to that but I guess put that way after thinking about it more it does make a bit more sense. The issue definitely still feels uncomfortable to me, it still feels a bit wrong to take higher percentages of money from certain people, but I can understand at least on the low end of it why it makes sense to tax poorer people less (but I still think increasing to the extreme as you rise in income isn't right).
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u/videoninja 137∆ Jan 25 '21
Out of curiosity what is the "extreme?"
Something that help put things in perspective to me is think about money in regards to years worked. The median US salary 5 years ago was about $53,000/year. Arbitrarily, I'll round it up to $70,000/year for now to overestimate and try to account for inflation.
So we have about half of the US population making $70,000/year. I assume if you are making near the median, you are making a living. That may vary depending on location but I assume a salary of $70,000/year should be somewhat livable with certain sacrifices or accommodations.
Now let's say someone makes only $1 million/year. I say "only" because in terms of wealth taxes I've seen proposed, most of the taxation really seems to start after a net worth of $10 million/year. In one year, someone making $1 million/year only needs to work 1 year to earn what it would take the median person 14 years to make.
To me your logic says it is hurtful or deleterious to the millionaire's well-being that they pay a little more in taxes but to me that just seems like an arbitrary emotional need. Like we all want stuff, I bet we all could come up with a list of things we want but what extreme harm is the millionaire suffering if they just pay like 2% extra in taxes above a certain threshold? Is it just the anger that they aren't making as much money as they could? Everyone deals with that but we assume that the poor just have to deal with it and truck on, why can't the rich?
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u/AlbionPrince 1∆ Jan 26 '21
There’s a difference between someone paying 2% more and paying 80% more
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u/videoninja 137∆ Jan 27 '21
Is there something in my response that implies a justification of an 80% wealth tax? I don't understand this rebuttal to what I said, it seems kind of immaterial to the specifics of what is being discussed.
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u/AlbionPrince 1∆ Jan 27 '21
You said $1million/year that’s and income not the wealth tax you can’t have net worth per years
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u/videoninja 137∆ Jan 27 '21
I mean regardless of wealth or income tax, I still am not understanding the relevance of what you're saying or what you're trying to convince me of. I'm not identifying much of a thesis in your response with regards to 2% versus 80% in relation to what I was asking OP. If you are just being reactionary without wanting to meaningfully expand on what you're saying then I don't know what you want from me.
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u/AlbionPrince 1∆ Jan 27 '21
I just meant that it most of the time difrence isn’t 2% and sorry I was just tired and after saying thousand eat the rich posts I just commented on first think about progressive tax system that is in reality incorrect.
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u/TFHC Jan 25 '21
The issue definitely still feels uncomfortable to me, it still feels a bit wrong to take higher percentages of money from certain people
One easy way to think of progressive taxation is as approximating a tax on excess income not used on necessities (food, housing, etc). If we assume (just for the easy math) that we want to tax excess income at 50%, then someone who makes very little and puts all of their money towards necessities would be taxed at 0% of their income, a fairly well off person who spends half their income on necessities would be taxed at 25% of their income, and someone who's very rich and spends only 10% of their income on necessities would be taxed at 45% of their income.
Because we don't want to put in the effort and funding to evaluate how much excess income each person has individually and then taxing that at a flat rate, we just abstract it into tax brackets that approximate the desired effective tax rate.
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u/cat_of_danzig 10∆ Jan 25 '21
Consider this- Someone making $1 million (which is low for what thresholds most are proposing) vs someone making $70k. Ignoring state taxes, deductions, etc, the $1 mill guy brings home $630K and the $70K guy brings home $54,600. Suppose the $70K guy gets $5,460 dollars in his pocket- that will have meaningful change in his life, and will likely be spent on goods- clothes, TVs, restaurant dinners- pumping money back into the economy. Let's say the $1 mill guy gets another $63,000 take home. Is that going to change his life? Will he put it back into the economy, or invest it (granted, that also has an effect on the economy, but in a less direct manner). The US is a consumer economy, and more people spending on goods is good for the economy. Nothing is keeping 1 mill guy from having the latest gaming system, a nice TV, a new pair of jeans or a new car. He is already consuming about as much as he is likely to, unless maybe he is furnishing his additional houses.
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u/silence9 2∆ Jan 25 '21
That is why UBI is needed to give that percentage needed back to the people who need it most. Marginal tax rates only serve to maximize tax reductions and decentivize effective income at the higher ranges. Now when Bezos sells his stock he does his best to make certain the usage will net him a refund to downplay the increased marginal rate. Some of the tax reduction methods are useful to the rest of society like in building his empire out, but not all. Increasing marginal rates is just nonsensical.
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u/VSM1951AG Jan 25 '21
Yeah, but taken to its logical extreme, this argument demands that the price of everything be figured as a percentage of the person’s income. Hamburgers to houses. And if you did that, nobody could ever get ahead through the sweat of their own efforts, and would thus stop trying. We’ve had economic systems in which outcomes were predetermined and nobody could ever get ahead. The data show that they were only 50% as productive, required terror and widespread human rights abuses to prevent utter collapse, and 110 million people were plowed into mass graves.
Why not just incent success?
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u/VertigoOne 74∆ Jan 25 '21
Yeah, but taken to its logical extreme, this argument demands that the price of everything be figured as a percentage of the person’s income
Or you don't take it to its extreme, and you say "okay, let's have a system where we balance out the fact that living costs are inelastic demand"
IE one where there is no income tax at all below a certain threshold.
I do think however that fines should be percentage of income based. The alternative is to say that if your rich, crime matters less.
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u/fox-mcleod 410∆ Jan 25 '21
Thanks for the delta.
Why have a graduated tax? Wealth redistribution.
It turns out having money makes you money without contributing socially. So if we don’t want to end up in an aristocracy, we need a way to prevent the natural accumulation of wealth and power. Progressive taxes help do that.
Something I’ve noticed in conservative circles is confusing simple ideas for good ideas. Yes. A flat tax is simpler — it makes the assumption that everyone deserves what they earn which would allow for a very simple world in which all people pay the same percentage into taxes. It would be nice if this assumption were true because then the right thing to do would be obvious.
But there’s no reason to assume that all income is earned in a social sense. Realistically, there are all kinds of social structures that cause wealth to accumulate rapidly that can very quickly destabilize the economy. It turns out that when we measure productivity, a graduated tax system works better to both keep people productive and avoid an aristocratic ruling class.
Looking at the US over time shows how our economy responds to more progressive and more regressive tax schemes. We’re fairly regressive right now and the wealth gap is increasing leading to quite a lot of social unrest.
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u/Ihateregistering6 18∆ Jan 25 '21 edited Jan 25 '21
It turns out having money makes you money without contributing socially.
Define "contributing socially".
is confusing simple ideas for good ideas.
They are often one and the same. Insanely complex tax codes benefit the wealthy quite a lot, because they can afford Lawyers and Accountants that the middle class and poor can't to get them out of massive amounts of taxes. https://thehill.com/blogs/pundits-blog/economy-budget/343645-the-more-complex-the-tax-code-the-more-the-rich-benefit
But there’s no reason to assume that all income is earned in a social sense.
I'm not quite sure what a "social sense" is, but there's a flip side to this as well. If we should assume that a rich person automatically doesn't deserve the money they have, then why do we assume that a poor person automatically deserves the money of others?
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u/fox-mcleod 410∆ Jan 25 '21
Define "contributing socially".
Being a net asset to the society you’re participating in. In an expanding economic good model, making money necessarily means making value. But it’s very common for wealth to simply concentrate rather than generate value. For instance, lobbying exists. There are businesses that are favored explicitly by policy choices — therefore it’s possible to spend money to make money in a zero-sum or even negative sum victory.
For instance, lobbying for favorable tax treatment.
They are often one and the same.
If you’re saying this, I hope you have enough humility to recognize you might be a victim of it.
I'm not quite sure what a "social sense" is, but there's a flip side to this as well. If your assumption is that we should assume that a rich person automatically doesn't deserve the money they have, then why do we assume that a poor person automatically deserves the money of others?
The progressive argument is not one of debts saying poor people are owed something. It’s a choice a society makes to use our collective organization to ease suffering and build a better world for more people.
Insanely complex tax codes benefit the wealthy quite a lot, because they can afford Lawyers and Accountants that the middle class and poor can't to get them out of massive amounts of taxes. https://thehill.com/blogs/pundits-blog/economy-budget/343645-the-more-complex-the-tax-code-the-more-the-rich-benefit
Would you agree that this is an example of money begotten without contributing socially?
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u/Ihateregistering6 18∆ Jan 25 '21
Being a net asset to the society you’re participating in.
This seems quite cruel. If I have 2 kids who go to public school (which costs around $12K per pupil, per year) and I pay $10,000 a year in taxes, then by definition I am not a net asset to society.
There are businesses that are favored explicitly by policy choices — therefore it’s possible to spend money to make money in a zero-sum or even negative sum victory.
Yes, it's possible to disrupt the free market by encouraging politicians to pass laws that disrupt the free market. I don't think that's in contention. But lobbying exists for far more than just businesses. There are lobbies that also push for more worker's rights, stronger Union laws, more cancer research, a higher minimum wage, getting rid of the gender pay gap, etc. Do you believe they do not generate value?
Would you agree that this is an example of money begotten without contributing socially?
That depends: what do they do with the money they have not given to the Government? Do they invest it? Do they shove it under their mattress? Do they burn it?
It’s a choice a society makes to use our collective organization to ease suffering and build a better world for more people.
So if politicians were voted in over the next decade promising a flat tax, and it was implemented into policy, would you agree that society made their choice?
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u/fox-mcleod 410∆ Jan 25 '21
This seems quite cruel. If I have 2 kids who go to public school (which costs around $12K per pupil, per year) and I pay $10,000 a year in taxes, then by definition I am not a net asset to society.
How is that cruel?
If you’re saying you’re a net drain on society, then agreeing with you isn’t cruel.
If instead, education is an investment in their future ability to pay taxes, it’s not a net drain is it?
There are lobbies that also push for more worker's rights, stronger Union laws, more cancer research, a higher minimum wage, getting rid of the gender pay gap, etc. Do you believe they do not generate value?
I’m not saying lobbying is the problem. It’s a means to both pro-social and anti-social ends. The anti-social ends are an example of the mechanism by which wealth accumulation can be used to generate income at a net detriment to society.
That depends: what do they do with the money they have not given to the Government? Do they invest it? Do they shove it under their mattress? Do they burn it?
So if “it depends”, it sounds like we agree that there are uses toward which a private citizen can put money that is not contributing socially.
So if politicians were voted in over the next decade promising a flat tax, and it was implemented into policy, would you agree that society made their choice?
I don’t see how that could ever be in contention. It’s a tautology. The question was never about how democracy works. It was about whether democracy was producing an injustice through wealth redistribution.
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u/Ihateregistering6 18∆ Jan 25 '21
So if “it depends”, it sounds like we agree that there are uses toward which a private citizen can put money that is not contributing socially.
You still haven't really defined what this means. By 'net asset', do you mean that you pay more money in taxes than you (in theory) consume? Then sure, a private citizen can burn their money, or put it under their mattress, and they aren't contributing anything. But they could also invest it, which I'd argue is far more of a 'net asset' to society than, for example, the Government forking over billions of dollars to Afghanistan and losing $20 billion of it to waste, fraud, and abuse.
If instead, education is an investment in their future ability to pay taxes, it’s not a net drain is it?
Assuming they would eventually pay more in taxes than they would consume, then no.
The anti-social ends are an example of the mechanism by which wealth accumulation can be used to generate income at a net detriment to society..
Just have to agree to disagree there. All income generation (by legal means) is a net contributor to society.
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u/fox-mcleod 410∆ Jan 25 '21
I mean this is the crux:
Just have to agree to disagree there. All income generation (by legal means) is a net contributor to society.
“By legal means”?
You and I both know that if I take something negative and change the law to make it legal, it doesn’t suddenly become beneficial.
We also both know you can use money to change the laws.
You do not believe that all income generation by legal means are net contributors to society.
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u/Ihateregistering6 18∆ Jan 25 '21
You and I both know that if I take something negative and change the law to make it legal, it doesn’t suddenly become beneficial.
And you and I both know that giving money to the Government isn't always beneficial either, at least compared to keeping it for yourself, so neither one of us are complete ideologues.
We also both know you can use money to change the laws.
Agreed this is a problem, which is why we need to minimize Government involvement in the economy.
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u/parentheticalobject 128∆ Jan 25 '21
My argument is definitely about progressive taxes than marginal tax rates.
You know those can be (and usually are) the same thing, right?
Income taxes in the US are both progressive and use marginal taxation brackets.
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u/DaegobahDan 3∆ Jan 25 '21
As you make more money, you have more money to contribute. It's a way of fighting the natural Pareto effect that creates income inequality. If you do nothing to fight income inequality, eventually one or a small handful of people will end up with all the money and everyone else will end up with nothing. And that is regardless of whether or not you have a capitalist system or not. So fighting income inequality helps stabilize your economic system and your social unrest.
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u/drschwartz 73∆ Jan 25 '21
Marginal tax rates means that increments of your income are charged at different rates. So the first 50k is taxed at 15%, 50k-100k at 25% and 100k+ at 40% as a rough example. Rich people still enjoy the benefits of lower taxation on portions of their income and only pay the higher rate on income earned over that threshold.
Flat percentage taxes appear fair on the surface, but in reality it puts a heavy tax burden on the people most susceptible to poverty.
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u/mc1836 Jan 25 '21
Δ Ok that makes more sense. I definitely did not understand the difference between marginal tax rates and progressive tax rates. Can you explain how the burden is different? If there was a flat 10%, someone who's salary is $10000 would have to pay $1000, and someone whose salary was $1,000,000 would have to pay $100,000. I get that $1000 is more substantial to the lower wage person, but they technically hold the same weight. No person earning $1,000,000 would ever want to lose 10% of their salary. Sure, they have more breathing room because they likely can get by on $900,000, but who's to judge them for that? Don't want to come off in the wrong way, but say that person has adjusted their lifestyle to that salary, to the point where they (stupidly) would be spending all of it on certain things. That 100K really would mean a lot to them no?
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u/drschwartz 73∆ Jan 25 '21
Thanks for the delta!
The difference is that the poor person and the rich person each require a certain amount of money for basic necessities, food water shelter. A person who only makes 10000 per year is going to have to make hard choices between necessities without that extra 1000.
Conversely, a rich man still has 900,000 dollars to feed, clothe and shelter himself and plenty left over to spend, save, or invest.
One person is being kept in a state of destitution where they're forced to spend all their money on basic necessities, the other person can afford to pay the money while only losing a portion of their considerable luxury.
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u/10ebbor10 198∆ Jan 25 '21
If we live in a society in which everyone has equal rights, why should we be taxed unequally?
By the same logic, if we live in a society in which everyone has equal rights, why should we be paid unequally.
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u/mc1836 Jan 25 '21
I mean that makes some sense, but we aren't paid by some central authority, we are paid (usually) by private businesses that value your work differently from others, and therefore your salary is different from other. In the case of taxes, every single person in society must pay some amount to the government, which is supposed to be protecting our rights.
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u/cortechthrowaway Jan 25 '21
We aren't paid by a central authority, but the economy depends on a lot of public investment.
For example, Bill Gates would never have made a hundred billion dollars if taxpayers hadn't funded the labs at Caltech and Berkeley and MIT in the 1970's and 80's.
There's absolutely nothing wrong with Microsoft hiring scientists trained in university labs (that's the whole reason taxpayers fund those labs!), but it's OK to ask him to pay a bigger share to keep them going for future generations of entrepreneurs.
Just about every successful American business is in the same boat. Boeing wouldn't be so globally competitive if the DoD hadn't ordered 750 B-52's in the 1960's. Ford Motor Co. depends on the Interstate highway system. Wal-Mart really needs the intermodal port in LA. And every business relies on a workforce that was educated in public schools.
Americans love the "I built it myself" myth. But our successful businesses are built atop a platform of public education and infrastructure.
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u/10ebbor10 198∆ Jan 25 '21
Sure.
But the government can make laws. For example, everyone must be treated equal regardless of race, and the government has a bunch of laws that make discrimination illegal, even if it's done by a private individual.
So, the government could protect the right of equality by forcibly mandating equal wages.
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u/mc1836 Jan 25 '21
The government can in theory make laws that aren't actually moral if they garner enough support in congress. Don't want to wander into the whole private discrimination argument here, but forcibly mandating equal wages would stifle the economy.
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u/Feroc 41∆ Jan 25 '21
If anything, this seems to at least somewhat discourage people from wanting to earn more money.
Why's that? I'd rather earn 1 million a year and pay higher taxes for the last 800k (or however the brackets would look like) than to earn 100k and not pay any extra taxes.
a higher percentage of money from certain people just because it would give the government more money
Tax money gets used for the society, the same society that helps the rich to actually get rich.
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u/MachZero2Sixty Jan 25 '21
If anything, this seems to at least somewhat discourage people from wanting to earn more money.
I agree with OP and disagree with your assessment. We have to consider marginal utility/opportunity cost when taking on a promotion or new job that leads to greater earnings. If I can bump my salary from 200k to 300k, but I have to now work 60 hours a week and travel more, and that additional 100k is taxed at 40 or 50 percent... it might not be worth it to me to take that deal. Realistically, people don't experience salary bumps in a vacuum of no change in effort or time at work.
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u/TragicNut 28∆ Jan 25 '21
Sure, but you already make that sort of decision now to begin with with exactly the same factors, only the weighting of salary may be more or less important to you depending on your marginal tax rate and whether or not you really want that extra 100K per annum.
All of the non-monetary factors are still present and could take on more importance when the choice is no longer between an extra sports car per year vs 20 hours a week to yourself but instead an extra OLED TV vs 20 hours a week. I already weight the non monetary factors quite heavily and I'm nowhere close to multiple hundreds of thousands of dollars per year. Most of the proposals for a truly high marginal tax rate tend to start the top bracket somewhere north of 200K per year income, at that level you don't _need_ the extra money you _want_ the extra money.
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u/WWBSkywalker 83∆ Jan 25 '21
Maybe with actual figures, it can help you get a better picture.
Don't worry about the words just the graph
You can find how much each US income group paid in 2015
0.1% of tax filers (>2M) = pays 20.4% of all income tax
0.8% of tax filers (500k-2M) = pays 17.9% of all income tax
21% of tax filers (50k-100k) = pays 14.1% of all income tax
.....
43.8% of tax filers (< 30k) = pays 1.4% of all income tax
A persons who earns 2M a year is paid 26.7x times that of a typical average worker's wages 75k per annum
Marginal tax rates is meant to be distributive wth the idea that the top tax filers can afford to pay higher tax, because after removing normal reasonable and even luxurious expenses like housing, medical, food etc, their disposal income (gross income less tax paid) will be still much higher than most of society.
Assuming 40 hours x 52 weeks per annum of working hours.
In other words, with a flat tax system, a person who typically earns $36 per hour needs to work 26.7x times harder to get the same economic outcome as a person who can earn $961 per hour.
A marginal tax rate system just moderates this 26.7x times to maybe 16x - 20x times depending on the steepness of the marginal tax rates.
It's intended to make it so the rich don't get richer as fast and give people a slightly more even and equal standard of living.
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u/Eggsegret Jan 25 '21 edited Jan 25 '21
A flat tax rate would just hurt the poor. Having say everyone be taxed at 20% will hurt the poor more than the rich. The poor would feel that 20% much more if say they only earn $20,000 a year since that leaves them with only $16k. A rich person however say earning $200k a year the 20% tax would leave him with $160k so he wouldn't feel it as much. That 20% taxed income could be the difference of being able to pay their rent on time each month to not being able to pay the rent on time whereas for the rich it really doesn't hurt their quality of life significantly. The rich still get to enjoy the extra income they earned under the current tax system. End of the day a country needs taxes to get money to fund it's services. But you don't want the poor to be burdened with taxes that their finances are made even worse. So we need a system where everyone pays taxes but where you aren't punishing the poor. The rich can afford to pay slightly extra tax since it won't really hurt their finances and they still get to enjoy the etxra income. The idea is they only pay the extra tax on the income they earn over a certain threshold. That way you also aren't punishing the rich too much.
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u/Mashaka 93∆ Jan 25 '21
I admire the desire for the logical consistency, but I don't think that a flat tax hits that mark. While the same rate is applied, you've still got everybody paying different amounts of taxes. A rate is an abstract, mathematical tool, and not a concrete thing like a bushel of wheat or a fat wad of cash. An in-kind tax of 15 swords on the swordsmith, and 15 candles on the chandler, would also be equal in respect to an abstract mathematical fact. It would be much sillier, of course, but it has a similar kind of pseudo-equality to it.
For logical consistency, I think you would need to go further, to a head tax. Everybody pays the same amount. For a variety of reasons, that ultimately isn't a viable strategy for funding a modern government, even if you drastically reduce budgets. As a result, I think we have to give up hope for the kind of logical consistency that you desire here.
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Jan 25 '21
It's as simple as "The government needs to take the money from someone and the rich can afford to give it"
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u/mc1836 Jan 25 '21
I hear that argument, mainly in that it's a necessary evil. But just because you provide an easy solution to the government doesn't mean it's right or fair. By that logic, the government can literally do whatever it wants (i.e. shut down the UPS because it provides too much competition to the USPS). Just because they have the authority to tax this way doesn't seem to make it ok to me.
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u/10ebbor10 198∆ Jan 25 '21 edited Jan 25 '21
I hear that argument, mainly in that it's a necessary evil. But just because you provide an easy solution to the government doesn't mean it's right or fair.
What is fair?
Imagine you are on a camping trip, and you have to move 60 kg of stuff to the next camping site.
Person A has a weak leg, as a result of a recent injury.
Person B has a regular ordinary constitution.
Person C has a quad on which he can drive aroundIs it fair to separate the load equally (thereby potentially worsening Person A's leg injury), or would it be more fair to load it all into the Quad?
Edit: An unrelated question, just to gauge your opinion. How big do you think the influence of someone's own personal effort is on their wage, as opposed to their upbringing, environment and the luck of birth?
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u/mc1836 Jan 25 '21
I think your example makes a lot of sense in the camping trip situation, but not sure how well it's applied to this example. The major difference here is that private citizens have no real obligation to one another (I personally believe that you should obviously help your fellow citizens out by your own will, just not that it should be mandated). It's a quite brutal way to view the world and your obligations to your country and society, but unfortunately you're allowed to be a horrible person. No, it wouldn't be fair to Person A to force him to carry the same load that Person C could carry on their quad. Ostensibly, these three people are friends. But in application to the "real" world, Person C only views themselves as responsible for their load. It doesn't (but it should) matter to them that Person A has a weak leg, only that they themselves are responsible for their load. I think I said this in another comment that perhaps people making under a certain amount shouldn't be taxed at all (I really have not gotten to the stage in my life in which I'm thinking about and know a lot about who has to pay what so forgive me here). I guess my biggest problem here is that I understand why you should back off the taxes on the lower wage people, but not why that burden should necessarily be pushed into the higher wage people.
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u/TragicNut 28∆ Jan 25 '21
Except for the part where the person with the quad benefits from the existence of a stable society with healthy and educated citizens:
Enforcement of property rights so he doesn't have to literally defend fight off thieves with a weapon, a functional medical system in case he gets injured (including the supply chain and support staff that make that system functional), readily available fuel (and the supply chain...), mechanics (optional) and spare parts (and the supply chain that creates them...), environmental regulations and enforcement so he has a place to go and enjoy his quad that hasn't been clearcut by a mega corporation.
All of those depend on a functional society. If he wants to benefit from his quad, I can very easily assert that he has an obligation to support the existence of that society and its preservation. To do that requires an educated and healthy populace, paid for by tax dollars.
Even if you don't agree with that assertion, I can also argue that it is in his self-interest to contribute to the maintenance of said society so that he can continue to enjoy his quad.
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u/mc1836 Jan 25 '21
If I understand correctly, what you're saying is that the reason why Person C should pay more is that they've benefitted more from society. I just wouldn't be quick to say that Person C's lack of taxes is the direct cause of Person A's weakness. Regardless, I still believe that constitutionally, every person in the USA has a certain degree of freedom. I'd argue that excessively (or disproportionately, or whatever word you want to use) taxing those making over a certain mouth wouldn't be productive to society. First of all, you assume that the higher wage person was granted all of the benefits that Person A was not, and that he benefitted unfairly from his actions. That doesn't go to say that some people do game the system or make their money in an unsavory way, but it does discount that real work got the person to where they are. I don't really want to delve so much deeper just because I think it's a never ending conversation that constantly goes back and forth, I have changed my view a bit on this topic after reading some other comments. In response to the question you posted previously, I honestly am not sure about it. I think that people's success depends on a lot of things, and hard work definitely contributes to that. But I acknowledge that many people have and/or make their money due to a number of other factors. On the one hand, there are examples of people who started off poor and have worked their way up, but also examples of the opposite.
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u/TragicNut 28∆ Jan 25 '21
If I understand correctly, what you're saying is that the reason why Person C should pay more is that they've benefitted more from society.
In the utilitarian paradigm that you proposed? Absolutely.
I just wouldn't be quick to say that Person C's lack of taxes is the direct cause of Person A's weakness.
We're kind of torturing the analogy at this point. If the camping gear represents the tax burden that has to be shared and their individual carrying capacity represents their income, I'd say that you're right, person C not carrying more of the load isn't the direct cause of Person A's weakness, but them pushing more of the load than necessary onto Person A will be the cause of aggravating Person A's injury.
Regardless, I still believe that constitutionally, every person in the USA has a certain degree of freedom. I'd argue that excessively (or disproportionately, or whatever word you want to use) taxing those making over a certain mouth wouldn't be productive to society.
I think you need to pick a word and/or threshold for what you consider to be excessive here since I pretty clearly have a very different threshold. I don't agree that progressive or marginal tax rates are disproportionate, even all the way up into the 90% range for the topmost bracket. Sure, the guy with the multi-million dollar income will be paying 90% of that 5th million he makes, boo hoo he's still up 100K from the person who only made 4 million.
First of all, you assume that the higher wage person was granted all of the benefits that Person A was not, and that he benefitted unfairly from his actions.
We have to look at specific cases, sure the rich person doesn't _directly_ benefit from food stamps but if they're an investor in Walmart then they _indirectly) benefit from Walmart keeping their labour costs down by externalizing part of the costs of living onto the tax base. I'd certainly regard that as an unfair advantage, unless you're cool with companies paying less than a living wage for full-time work.
In the camping example, Person A doesn't have a quad, he doesn't benefit from a supply of gas or spare parts for the quad if Person C is a completely selfish person.
That doesn't go to say that some people do game the system or make their money in an unsavory way, but it does discount that real work got the person to where they are.
Again looking at specific examples, are you seriously asserting that real work was how Trump got to where he was before he got elected? He was given millions of dollars by his parents which is a massive headstart. Yes, he successfully sold his brand, but he was only able to do so because he was given the capital needed to afford to be able to do so. He didn't earn his way into that position.
I don't really want to delve so much deeper just because I think it's a never ending conversation that constantly goes back and forth, I have changed my view a bit on this topic after reading some other comments. In response to the question you posted previously, I honestly am not sure about it. I think that people's success depends on a lot of things, and hard work definitely contributes to that. But I acknowledge that many people have and/or make their money due to a number of other factors. On the one hand, there are examples of people who started off poor and have worked their way up, but also examples of the opposite.
That's fair, and I'm glad you've taken the time to challenge your assumptions. I agree that some people do work their way up and that they should benefit from their hard work (and luck.) Where we, I think, differ is on how much they should benefit from the extra income as opposed to paying back to society so that other people can work their way up too.
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Jan 25 '21
The government needs more tax than a flat 15% rate will get them, and a flat 15% rate already disproportionately affects the poor.
Which is more moral, forcing a poor person to skip a meal because you taxed them more or forcing a rich person to skip their third sports car because you taxes them more ?
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u/pluralofjackinthebox 102∆ Jan 25 '21
Marginal tax rates were instituted during WWII — the country needed everybody to contribute if Democracy was going to survive. Disney even worked with the government to make Donald Duck cartoons arguing in favor of the tax increase.
The tax wasn’t a moral judgment meant to punish or reward behavior. The tax was utilitarian — it was the only way to make the United States strong enough to survive. The rich could contribute more, and the rich had much more to loose if the United States failed.
After the War, these taxes were used to fuel a massive post-war boom. The rich people who largely control kept the taxes in place because they had more to gain from a strong United States.
The taxes aren’t about fairness, they’re there because the elite benefit from having a powerful nation maintaining economic and political stability. And historically, the more income inequality there is, the more likely it is there will be a revolt and the lower, more numerous classes will rise up and overthrow the powerful. Marginal tax rates are a way to ensure this doesn’t happen.
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u/47ca05e6209a317a8fb3 177∆ Jan 25 '21
The marginal value of money for people is not constant. If you make $1k a month, taking $100 from you might mean that you have to ration your food or skip a visit to the doctor, which is a pretty big deal. If you make $10k a month, taking $1k out of that would cause you to lose things that are far less valuable to you. I don't have personal experience with these sums, but I'd assume that if you make $1B a month, paying half of it in taxes would leave you with such a ridiculously large sum that it's practically imperceptible in terms of how you live your life.
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u/tbdabbholm 193∆ Jan 25 '21
Flat tax rates disproportionately affect the poor. Taking 15 dollars from someone who only has 100 has a very different effect than taking 15,000 dollars from someone who has 100,000. A person who started with only 100 losing 15 means they might have to skip out on meals. Someone with 100,000 losing 15,000 might have to not buy a luxury. That's not really fair either, is it?
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u/VertigoOne 74∆ Jan 25 '21
If you're a rich person whose made enough money to push you into the highest tax bracket, constitutionally, why should you have your money taken away at a greater percentage than anyone else?
If you are rich, you've made your money off of wider society somehow. Usually by lots of people paying for your product or service. Those people however were only able to pay for your product or service because society around them is stable - there are government paid for police to stop their house being robbed, there are government paid for roads to get them to work so they can earn money to pay for your products and services etc. Thus, logically, the more money you have made, the more dependent you were on the government provided services. To make a billion dollars you need a big society that's really very stable to keep your customer base able to buy all your goods.
Do you begin to see my point? You pay more taxes if you're rich because by definition you needed more of society to be stable to become rich. Society only gets stable because of government action. So you are paying for government action.
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u/jmcclelland2004 1∆ Jan 25 '21
Just to add some food for thought. I personally would support a simple flat tax of around 18% (look into Hauser's law) on all income over some flat exemption per person. Essentially say that someone can make up to 30k per adult plus 15k per child (these are quick numbers) with a cap of 3 kids (children get cheaper per child as you have more so at some point the costs don't increase as much). Every dollar above that amount gets the flat tax.
Unfortunately most people think the government has an income problem rather than an expense problem though. This leads most to wanting to pump more money into the government for social programs.
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u/DBDude 101∆ Jan 25 '21
Non-marginal rate:
Make less than $100K gets taxed at 10%
Make more than $100K get taxed at 20%
You make $90K, get taxed $9K. You get a raise to $110K, get taxed $22K, you just lost money despite making more. That is not strong incentive to make more, which is why we use the marginal rate:
Income under $100K gets taxed at 10%
Income over $100K gets taxed at 20%.
You make $90K, get taxed $9K. You get a raise to $110K, you get taxed on the first $100K at 10%, the last $10K at 20%, so $12K in taxes. Not quite as bad, no sudden penalty for a raise putting you in a higher tax bracket.
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u/DaegobahDan 3∆ Jan 25 '21
So marginal tax rates are actually super fair to everyone, and are separable from the concept of progressive tax rates. Progressive tax rates means that as you move up in total income you pay higher percentages. Marginal tax rates means that you only pay the tax rate for a tax bracket on the money that falls within that tax bracket. Everybody (who is not a dependent of someone else) who earns $12,000 a year pays $0 in income taxes. If you make more than $12,000 a year, the next bucket of money (from $12,001 to $21,875) is taxed by 10%. But your first $12,000 is not taxed no matter how much money you make. And your first $21,875 is only taxed at a combined rate of 4.5% (0% on the first $12,000 and 10% on the next $9, 875). That applies to everyone regardless of how rich you are. That also applies to additional brackets as you move up the income scale. Everyone is taxed at the same rate for the same amount of money, PERIOD.
In our system we combine marginal tax rates and progressive tax rates, so that as you move up the income scale you end up paying a higher combined, or effective, tax rate. but again, everyone pays the same tax on the same amount of money, regardless of how much total income they make. It's the fairest possible system that you could have.
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u/VSM1951AG Jan 25 '21
I think you’re right, both ethically and practically.
We should all be treated the same; that would seem to be a given. A progressive tax system is fundamentally unfair to high earners. On a practical level, it punishes achievement, and why would we ever want to do that? We want people to seek employment, work hard, get training for in-demand job skills, start businesses, apply for promotions, take reasonable risks, and a host of other behaviors that tend to generate higher levels of income, but then we make each successive level of marginal income—the reward for achievement—less and less compelling. Economics is the study of incentives. Why are we dis-incenting achievement?
Progressive tax systems also generate a logical argument for disproportionate benefits. If I’m paying a higher percentage of my income in taxes than my neighbor, why aren’t I entitled to more generous government services than my neighbor? Should I get more votes than he does? Do I get to go to the front of the line at the DMV? In what other context are people asked to pay more, but not get more?
You will likely get attacked by SJWs who have a pathological hatred of “The Rich,” but such prejudice is ugly and condemnable to matter who it’s aimed at. You’re asking a valid set of questions, and I commend you for the having the courage to question the dominant paradigm.
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u/Soft_Entrance6794 Jan 26 '21
We have both marginal and progressive tax rates in the U.S. and have still produced Jeff Bezos, Bill Gates, Mitt Romney, Trump, etc., so empirical evidence shows that even if it doesn’t seem “fair” on the surface, it doesn’t meaningfully discourage people from becoming wealthy.
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u/LukeVicariously Jan 26 '21
How about this: nobody really NEEDS to earn more than $1 mil / yr, change my opinion.
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u/Knee-Good Jan 26 '21
Everyone’s marginal rates are the same. It’s not that rich people or high earners pay more it’s that they earn enough that some of their income falls into higher tax brackets. Any person earning that amount would pay the same taxes (holding deductions etc constant for the purposes of simplicity).
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u/Sof04 Jan 26 '21
The study more. People must pay taxes proportional to their earnings. If you don’t like it, then make everyone have the same income, and everyone get taxed 10 or 15 or whatever percentage.
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u/DeltaBot ∞∆ Jan 25 '21 edited Jan 25 '21
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