You forgot the largest military in the world too ;). Though it does have some expenditure issuesâŚ
I was addressing your statement of ââŚbecause we give the rich such low effective tax ratesâ. But if you want data on progressivity of U.S. tax rates compared to other countries, here is one based on the percentage of taxes contributed by the top 10%, based on the same OECD data that wisefool quotes above:
And my very next statement was about capital gains tax. You responded with an income tax graph. Hence my confusion.
Apologies, I thought you had misread my question.
That matches up with what Iâve read on the topic Nesrie, thank you. I shall consider Andyâs claim unsupported until better data is available.
âExplain awayâ what? A difference in compensation between CEOs and ordinary workers is only a problem because you assume itâs a bad thing. Iâve worked for multiple companies, and I have never once worried that high CEO pay has somehow reduced my pay, because thatâs not how salaries work. And Iâll bet $100 that the CEOs Iâve worked for made more than every CEO youâve ever worked for.
Timex
1790
Itâs important to note that the taxes were structured differently, inflation plays a role in this comparison, and that the top tax rate actually did depress incentive to earn money beyond that level. the 91% bracket was on income over 200k, which is equivalent to about $2M in todayâs dollars, significantly higher than the top bracketâs cut off point today.
In terms of how much of their actual income the top 1% of earners paid in taxes, it was around 42%. This is higher than what they pay now, around 37%, but not drastically.
I think the real issue though that youâre correctly highlighting though, is that the economy did not stop. Because even when you get to the point where youâre hitting that top tax rate, and getting diminishing returns on any increase in personal income, the economy is still chugging along. Your business is still operating. Itâs still making stuff and selling it.
What it perhaps means, is that a CEO may not be motivated by increasing his own salary above and beyond $2M a year. Maybe heâll be motivated to do other things with the companyâs money. And that might be a good thing.
And really, everything else aside⌠I think we need to stay grounded, and acknowledge this simple truth:
If you are making $2M, every single year, you are rich as shit. The idea that you would âonlyâ be making two million dollars, every single year? Thatâs not something that inspires a lot of empathy from me. Iâm pretty sure youâll be just fine.
rowe33
1791
Oooh, can I get in on that bet??
Nesrie
1792
Yeah this specific report comes up a lot.
Itâs not really that itâs wrong so much as an easy visual for those who donât like to read.
It reminds me of arguments about taxes and all these graphs get thrown around and then you find out because of the way we categorize say military spending, itâs not there so it makes other taxes also in the budget look huge⌠stick that in there and suddenly what we spend our money on looks completely different. Itâs cherry picking, and completely misleading.
Capital gains taxes are income taxes. The chart I provided for average federal income tax rates includes the capital-gains rates. Ordinary income and capital gains are both income taxes.
⌠The numbers Andy gives are Federal average tax rates. Those are, of course, not the only taxes we pay. State and local taxes are regressive, meaning poorer people pay a larger percentage of their income on them:
Combining these numbers, overall taxation in the US is not especially progressive, with the bottom 50% paying 14%-ish and the top 1% paying 34%-ish.
Matt_W
1795
Not arguing with your points, which are good, but just wanted to highlight that this is all by design. The high marginal tax rate at very high income reduced incentive to become uber wealthy, therefore high earners didnât earn much at that rate. This is exactly what tax policy aimed at reducing inequality looks like.
Iâll bite. How do they work? Arenât salaries zero sum to some degree? If a CEO made 5x average employee salary instead of 270x average employee salary it seems like the company could use that money to hire another 250 employees or double the salary of 250 employees or give 10% raises to 2,500 employees, or even purchase equipment or a better company health plan. In fact, itâs kind of hard to imagine a way that the company could spend that money that wouldnât benefit employees more than CEO salary does.
Now youâre moving the goalposts. The report I cited showed that the U.S. tax system is more progressive than other countries, which is true. But now youâre talking about âHow much does the U.S. tax system reduce income inequality relative to other countriesâ, which is a completely different question.
Now that people can no longer claim that the U.S. tax system isnât progressive (it is), they have to shift the discussion to âinequalityâ.
Or that it need not. Youâre saying it does, therefore it must. Iâm saying it does, but it need not.
But if the purpose of the law is not to raise revenue, but instead to prevent the intergenerational transfer of large fortunes, then the law would be achieving its purpose, and the absence of revenue to the government from that estate isnât a bug.
Nesrie
1798
You didnât actually cite a report or the actual findings from the report. You cherry picked a single graph.
I donât believe anyone said the current system wasnât progressive at all. Do you remember what question you were answering?
Again, the Federal income tax system is. Thatâs not the only tax system affecting people people who live in the US.
Timex
1800
Ya, I agree. On some level, I donât have the same intrinsic desire to reduce inequality as you do.
However, that being said, I also donât actually see the PROBLEM with doing so, at a level where the top is earning $2M a year⌠It seems like thatâs plenty of money to lord over the plebs and live life high on the hog.
I think that there really does need to be some degree of inequality, as it provides a motivator to succeed. I just differ from those further on the right in that I think thereâs probably a diminishing return on how much motivation is being provided once you transcend a certain degree of wealth.
That is exactly how salaries work, because salaries are expenses, and business cannot by more expenses than they can pay, so everyone is competing for the salary pool. If the CEOâs goes up, it come from the pool that could increase yours.
I didnât âcherry pickâ anything; the graph shows the complete results from the OECD report. And youâve mentioned that report several times since then, so obviously you know what Iâm talking about. And you also said âitâs not really that itâs wrong so much as an easy visual for those who donât like to read.â And your article about inequality is a different question than whether the federal income tax system is among the most progressive system of all developed countries, which it is.
Yes, I was answering this:
Nesrie
1803
That graph does not show the complete results from the report. That can be found in the findings.
