Something good about higher marginal tax brackets

[harley]

you havent been paying attention, it isnt taxing wealth, it is taxing very high incomes. (and i expected more substance from you)

There's nothing here to respond to, so it's hard to have substance. If you think that a high marginal tax bracket is going to curb greed you are living in fantasy land. It's a nice thought, similar to pink jail cell walls ending crime. It just won't work. Sorry. And I'm not trying to be mean or obnoxious, I'm with Haha in his original response. Raised eyebrows and a disbelieving snort.

 

[ERD50]

you havent been paying attention, it isnt taxing wealth, it is taxing very high incomes. (and i expected more substance from you)

No, I was paying attention, but I did use the term 'wealth' loosely - just as we often hear that a tax on incomes above $250,000 is a tax on the 'wealthy'. Sorry for the confusion.

So yes, you are talking about an income tax, I understand. A 'wealth tax' would be along the lines of a personal property tax, or a tax on one's total net worth.

Regardless, as harley just stated - there is so little substance in the proposal, it's hard to respond with substance. But I'll give it a shot anyway:

I sometimes find it helpful, for illustration purposes, to take something to it's extreme. So let's imagine a tax system that totally redistributed income. No one can have any higher take-home pay than any other person. If you're a salesperson on commission, and you sell 2x as many cars as the next guy, well thanks, but your paycheck will have that extra commission taxed and redistributed to the rest of the nation.

Now, do you really think that a greedy person would change? I think their greed would just lead them to steal, deal in the black market... something.

An alcoholic can get just as drunk on Lite Beer as Vodka, he will just drink more of it. It does not change the underlying issue.

-ERD50

 

[jdw_fire]

I sometimes find it helpful, for illustration purposes, to take something to it's extreme. So let's imagine a tax system that totally redistributed income. No one can have any higher take-home pay than any other person. If you're a salesperson on commission, and you sell 2x as many cars as the next guy, well thanks, but your paycheck will have that extra commission taxed and redistributed to the rest of the nation.

Now, do you really think that a greedy person would change? I think their greed would just lead them to steal, deal in the black market... something.

An alcoholic can get just as drunk on Lite Beer as Vodka, he will just drink more of it. It does not change the underlying issue.

-ERD50

i like your example, as i think it proves my point instead of disproving it. to answer your question i think the change in the greedy person would be that he wouldnt bother to sell any more cars once he reached the point you are talking about and that is exactly what i would want to happen.

in the particular case of this last recession i have heard that the greed that prompted the bubble revolved around CDOs and CDSs. selling these was so profitable that more and more were created (CDSs out of thin air but CDOs required home loans so the lending standards slipped to fulfill that demand and many loans were made to people who never should have gotten a loan). this resulted in the bubble that burst and has/is costing us taxpayers trillions of dollars in lost asset value (real estate and stock) and government spending (in an attempt to prevent a depression) and eventually inflation (provided the government is successful in avoiding a depression).

and the salesmen of these instruments? they got their commissions and are gone. however if they were subject to your example tax system they would have stopped selling them (because the profit motive would be gone) long before a bubble was created and then there would not have been a need to lower loan standards nor to create so many CDSs or CDOs.

 

[Maurice]

Don't tax me, don't tax thee, tax the man behind the tree!

 

[ERD50]

i like your example, as i think it proves my point instead of disproving it. to answer your question i think the change in the greedy person would be that he wouldnt bother to sell any more cars once he reached the point you are talking about and that is exactly what i would want to happen.
...

Perhaps, but you ignore the other part of my response - I think that greed would just manifest itself somewhere else. Like a game of "Wack-a-Mole". Didn't 'solve' anything, just shifted the game.

And then onto the consequences... Wow, what a great world this would be where everyone was so disincentive-ized that they had no desire to do better than the next guy. I think the results of that would be far worse than what the scammers have pulled on us. And we would still have the scammers, just playing a new game.

-ERD50

 

[Independent]

No, I was paying attention, but I did use the term 'wealth' loosely - just as we often hear that a tax on incomes above $250,000 is a tax on the 'wealthy'. Sorry for the confusion.

So yes, you are talking about an income tax, I understand. A 'wealth tax' would be along the lines of a personal property tax, or a tax on one's total net worth.

Regardless, as harley just stated - there is so little substance in the proposal, it's hard to respond with substance. But I'll give it a shot anyway:

I sometimes find it helpful, for illustration purposes, to take something to it's extreme. So let's imagine a tax system that totally redistributed income. No one can have any higher take-home pay than any other person. If you're a salesperson on commission, and you sell 2x as many cars as the next guy, well thanks, but your paycheck will have that extra commission taxed and redistributed to the rest of the nation.

Now, do you really think that a greedy person would change? I think their greed would just lead them to steal, deal in the black market... something.

An alcoholic can get just as drunk on Lite Beer as Vodka, he will just drink more of it. It does not change the underlying issue.

-ERD50

Ronald Reagan was famously impacted by the 90% marginal tax bracket. He said that he made enough pictures to get up to the 90% threshold, then quit working. He didn't turn to the black market (where he couldn't have made money nearly as quickly anyway).

He thought that the American people lost something very valuable when he quit for the year. I don't think we really did. More important, I'm intrigued by the notion that we would have actually gained if those people pushing synthetic CDOs would have quit earlier in the year.

Nobody has suggested "totally redistributing income". I don't think the OP set a number, I'm guessing something like a 90% bracket starting at $1 million annual income.

 

[haha]

Nobody has suggested "totally redistributing income". I don't think the OP set a number, I'm guessing something like a 90% bracket starting at $1 million annual income.

This is simple envy of the havenots for the haves. Not very pretty. But if you ever do get your way, why would you think that they would stop above you income level?

Once it costs nothing to demand (at gunpoint no less) that which belongs to another, no one is safe. Because whatever your income level, unless it is abject poverty, there will always be deserving, suffering humanity who want what you have. If we run out of "poor people" in the US, there is always the rest of the world to support.

Ha

 

[traineeinvestor]

We could take some lessons from Canada on how to keep your banking system stable.

Or Australia or New Zealand or Hong Kong or Singapore or ......

The three quickest ways to stabilise the banking system are (i) to require borrowers to have meaningful equity (skin in the game) and the ability to repay and (ii) to impose higher cost of capital requirements on proprietary trading and (iii) to ban off balance sheet activities. None of this is inherently difficult from a regulatory perspective.

I am opposed to higher taxes. As others have said, taxation is a blunt instrument which punishes the innocent and the guilty alike. More importantly, if history is any guide the extra tax money will be used primarily for pork and cadillac pensions.

 

[jdw_fire]

Perhaps, but you ignore the other part of my response - I think that greed would just manifest itself somewhere else. Like a game of "Wack-a-Mole". Didn't 'solve' anything, just shifted the game.

well then lets take a look at the other part of your response

Now, do you really think that a greedy person would change? I think their greed would just lead them to steal, deal in the black market... something.

An alcoholic can get just as drunk on Lite Beer as Vodka, he will just drink more of it. It does not change the underlying issue.

-ERD50

i notice that your view is that if the people who sold CDOs and CDSs lost the incentive to sell alot of them they would turn to a life of crime to satisfy their greed. well i have 2 points - 1) i dont believe that all (or even a small, let alone a large, percentage) of the people who were selling these things are criminals at heart. i believe that many (if not all) of them didnt think that what they were doing (selling CDOs and CDSs) would crash the economy. they were good at what they were doing and it was legal and it paid very well so they did as much as they could, and i believe that if the incentive was removed they wouldnt turn to a life of crime to fulfill their greed. 2) we have laws against illegal activity and if they were to turn to that type of activity then hopefully our law enforcement agencies would catch, prosecute, and incarcerate them.

you also compare them to alcohlics which i also find a poor comparison since i dont believe that the majority of the people selling CDSs and CDOs have such a problem but if they have an addiction to greed akin to an alcoholic then they need to get help overcoming their addiction.

my bottom line answer to your greed argument is that i think it isnt something they have no control over and i think most people self regulate their greed, meaning they wont break the law to fulfill it.

And then onto the consequences... Wow, what a great world this would be where everyone was so disincentive-ized that they had no desire to do better than the next guy. I think the results of that would be far worse than what the scammers have pulled on us. And we would still have the scammers, just playing a new game.

-ERD50

it was in your example that "everyone was so disincentive-ized" not in my original post. i just used your example because you presented that example as a means of refuting my original point and i showed that it didnt refute it at all but instead supported my thought. i didnt suggest a tax code such as you suggested. i think the tax code could be made to disincentivize the very high incomes while not removing the "desire to do better than the next guy". most (almost all) people would not be close to being in the tax bracket i am talking about.

 

[jdw_fire]

This is simple envy of the havenots for the haves. Not very pretty. But if you ever do get your way, why would you think that they would stop above you income level?

Once it costs nothing to demand (at gunpoint no less) that which belongs to another, no one is safe. Because whatever your income level, unless it is abject poverty, there will always be deserving, suffering humanity who want what you have. If we run out of "poor people" in the US, there is always the rest of the world to support.

Ha

it is nothing of the sort, maybe you should reread the thread. the point isnt to redistribute income, the point is to disincentivize very high incomes as an economy protective measure.

 

[ERD50]

Ronald Reagan was famously impacted by the 90% marginal tax bracket. He said that he made enough pictures to get up to the 90% threshold, then quit working. He didn't turn to the black market (where he couldn't have made money nearly as quickly anyway). ...

I'm not keen on making generalizations from one individual, especially one with a strong opinion on the subject.

Nobody has suggested "totally redistributing income". I don't think the OP set a number, I'm guessing something like a 90% bracket starting at $1 million annual income.

it was in your example that "everyone was so disincentive-ized" not in my original post. ... i didnt suggest a tax code such as you suggested.

I know - that is why I specifically said "I sometimes find it helpful, for illustration purposes, to take something to it's extreme.". I thought that made it clear that I was not assigning this to you.

well then lets take a look at the other part of your response

....

i notice that your view is that if the people who sold CDOs and CDSs lost the incentive to sell alot of them they would turn to a life of crime to satisfy their greed. well i have 2 points - 1) i don't believe....

OK, don't believe it, but I think you are ignoring history, psychology, and the basic economics of supply/demand. They might not turn to 'crime', but they may find the next legal loophole to slime through, just as they did earlier. And greedy people can adapt to new loopholes faster than a slow-moving Congress can repair them.

you also compare them to alcohlics which i also find a poor comparison since i dont believe that the majority of the people selling CDSs and CDOs have such a problem but if they have an addiction to greed akin to an alcoholic then they need to get help overcoming their addiction.

my bottom line answer to your greed argument is that i think it isnt something they have no control over and i think most people self regulate their greed, meaning they wont break the law to fulfill it.

Well, I'd bet that many of them *do* have an 'addiction to greed'. And they will find the next path there. Why do people like Madoff keep running a scam after they have more than they could possibly spend? Yes, I think it is an addiction to greed, power, ego, etc.

I am opposed to higher taxes. As others have said, taxation is a blunt instrument which punishes the innocent and the guilty alike.

This is the biggest point, IMO. It just seems wrong to say that some behaved badly, so let's limit everyone, good or bad. Plus, I do believe the negative consequences would outweigh any benefit of a few that might give up their evil ways.

I think the problems of people being able to take risks with other peoples money could be better solved by more direct means, a few were called out earlier in this thread and a few countries given as examples of sounder systems.

I have to wonder how you would feel about this if you were an entertainer or athlete making Million$ for maybe a few years. Would you think it OK that the govt took 95% of your earnings, because somebody else acted badly?

-ERD50

 

[haha]

the point isnt to redistribute income, the point is to disincentivize very high incomes as an economy protective measure.

Ya shure, you betcha!

Ha

 

[jdw_fire]

ERD50,
you argument is inconsistant. on the 1 hand you have the opinion

Originally Posted by traineeinvestor
I am opposed to higher taxes. As others have said, taxation is a blunt instrument which punishes the innocent and the guilty alike.

This is the biggest point, IMO. ...

I think the problems of people being able to take risks with other peoples money could be better solved by more direct means, a few were called out earlier in this thread and a few countries given as examples of sounder systems.


-ERD50

which basicly says that using taxation to stop this behavior isnt specific enough and the collateral damage is too hi (more on this later). while you also say that these people are sooo set in their greedy ways that if a specific way of taking advantage of the system is closed they will just find another.

OK, don't believe it, but I think you are ignoring history, psychology, and the basic economics of supply/demand. They might not turn to 'crime', but they may find the next legal loophole to slime through, just as they did earlier. And greedy people can adapt to new loopholes faster than a slow-moving Congress can repair them.

-ERD50

again you wrote something that supports my thought. the thing about using the tax system to "stop" this behavior is that unless a loophole is created in the tax code or the person is willing to break the law there is no way around it. they cant just adapt and do it some other way. this is the reason i am suggesting this (since as i said in my 1st post up until getting this thought i was very much against higher taxes). how do we know now what in the future will bring us to the brink again? and since we dont know, how do we write laws or regulations that combat it? the only way i see of protecting our economy from the next such thing is using the broad brush of taxes on the very high incomes.

ok now a few words on the collateral damage being too hi. per wikipedia.org

As of 2005 there are approximately 146,000 (0.1%) households with incomes exceeding $1,500,000, while the top 0.01% or 11,000 households had incomes exceeding $5,500,000

which is a pretty light, in percentage of US households, collateral damage.

you also said

Plus, I do believe the negative consequences would outweigh any benefit of a few that might give up their evil ways.

just what "negative consequences" (besides any i have already addressed) are you talking about? this is a serious question as i am not seeing much of a downside, which frankly doesnt sit all that well with me. as i said before, deep down i dont like the idea of raising taxes.

 

[jdw_fire]

Ya shure, you betcha!

Ha

cant you come up with some constructive discussion of the point instead of just trying to ridicule me?

 

[clifp]

just what "negative consequences" (besides any i have already addressed) are you talking about? this is a serious question as i am not seeing much of a downside, which frankly doesnt sit all that well with me. as i said before, deep down i dont like the idea of raising taxes.

Well an obvious and much studied negative consequence is that likelihood that this rich folks rather sit idily by will vote with their feet. I don't think it is coincidence that when Britian had ridiculously high tax rates (see The Taxman) that 3 out of the 4 Beatles ended up in the US. We are already seeing a reverse brain drain, where entrepeneurs are moving back to their lower taxed countries of origin like Tawain, Korea, Singapore, and even China. Not only do we lose the financial benefit of taxing them, but more importantly they start companies in place other than the US.

Fortunately, for us Russia and China still have horrible political freedoms. But if they improve and the Russian maintain their flat tax rate of 13%, and the US has 50%, I wouldn't be surprised to the next Sergey Brin start Google in St. Petersburg.

 

[CuppaJoe]

This thread has run its course - - take it away, Porky!

YouTube - Porky Pig Cartoon Ending "That's All Folks!"