AH Challenge: Keep the top tax rate at 90 percent

I am aware that several decades ago, the top 1% paid an incredibly high percentage in taxes so I ask, how to keep it that high?
 
I'm sure somebody else knows more about this than me, but AFAIK, the top rate was cut as part of the 1980s' neoliberal pro-business re-orientation of the economy. This ultimately came from the end of the postwar boom in the late 1960s and early 1970s. So what you need to do IMO is reduce the magnitude of the either the bust or the boom or both. TBH I'm not really sure how you'd do this, as there's no one single easy cause of all this. Grrr, AH can be frustrating at times! ;)
 
90% would be difficult - you'd have to somehow push JFK/LBJ more to the Left, since the first cut from the 90% range to the 70% range happened in '63/'64. However, it bounced around fairly stably in the 70% range from '64-81.

It's quite possible that the only PoD you need is for Reaganism to not get into office, and you've got a top rate in the 70% range today.
 
As much as I'd like to see rich people get the stuffing taxed out of them, I think that taxes that high would discourage people from trying their best to make it in the world, knowing that in the end, the state will end up reaping the biggest reward. I mean, if a million dollars a year gets taxed 90%, then you might as well only make 200k a year and get taxed 50% (or whatever it would be).
 
As much as I'd like to see rich people get the stuffing taxed out of them, I think that taxes that high would discourage people from trying their best to make it in the world, knowing that in the end, the state will end up reaping the biggest reward. I mean, if a million dollars a year gets taxed 90%, then you might as well only make 200k a year and get taxed 50% (or whatever it would be).

What miccal99 said.

It's also important to distinguish between tax brackets and effective tax rates. Tax accountancy wasn't invented in 1980, after all.

Just to give an example, in 1979, when the top bracket was 70%, the effective rate of taxation on the top 1% was about 37%.
 
It's also important to distinguish between tax brackets and effective tax rates. Tax accountancy wasn't invented in 1980, after all.

Just to give an example, in 1979, when the top bracket was 70%, the effective rate of taxation on the top 1% was about 37%.

Now that's a good point; anybody have any info on what the high point for highest effective tax rate was?
 
It's quite possible that the only PoD you need is for Reaganism to not get into office, and you've got a top rate in the 70% range today.

I'm not sure what others might think about this, but I personally think a Democrat president in the 1980's (or even a less right-wing Republican), would have cut rates for the rich as well; think of the Kennedy tax cuts in 1963/64, for an example of the liberal side of politics giving tax cuts to the rich.

Whilst this isn't true in the UK, is is interesting and ironic that to my knowledge in a lot of Western nations, it is actually the left-wing parties which have the better record of reducing taxation in the post-war period on upper-middle earners (the record is more mixed on taxation on low and middle-income earners).

It to a degree disproves the theory of the Left being universally about 'soak the rich' taxation policies.
 
Kiat,

That 90 percent rate is only on income earned over $1 million, not on all taxable income.

What miccal99 said.

It's also important to distinguish between tax brackets and effective tax rates. Tax accountancy wasn't invented in 1980, after all.

Just to give an example, in 1979, when the top bracket was 70%, the effective rate of taxation on the top 1% was about 37%.


Did I ever say it was for the poor? This might come to a shock to some, but I am moderately versed in history, and I am well aware of the disproportionally high taxes, and how they started coming down with Kennedy. My original point still stands, in that one could make half a million and take home more after taxes than if they made a million. So what would be the point in making (or paying yourself) that much if it's all going to be consumed in income taxes?
 
I was under the impression that when a tax is, say 90% for those who earn over a million, this means only those earnings over a million are taxed at this rate?

So lets say the first ten thousand is tax free, over that is 20%, over a hundred thousand is 50% and over a million is 90%. The man who earns a million gross will earn (10,000) + (90,000 less 20%, so 72,000) + (900,000 less 50%, so 450,000), making a total of 532,000, just over fifty cents on his dollar. Now, for every dollar he earns in gross over a million, he gets only ten cents net. So the man who earns two million gross will actually make only 632,000 net.

This means he has to work 'ten times as hard' for every extra dollar, but that's not strictly true. Not many people get to earn over a million by working 9 to 5. Once you get to this level of wealth you have a lot of options for profit not open to the general public, such as long term investments.

The key points to taxing the rich more are twofold; First, there is the argument that since they have gotten so much more out of the economic system they exist in, they owe more back to maintain that system. They would not be millionaires if there weren't many more workers and clerks to support them. Second, there is the argument that they do not need all that money to fill their basic requirements, a millionaire can afford to lose half his wealth far better than someone pulling in a low five figures. This seems less persuasive to me, but it is factually true.
 
Plus, it acts to discourage organizations from paying individuals -- like, say, their board of directors -- money that could go into the company, or create perverse incentives to run it into the ground to grab a quick buck.
 
Plus, it acts to discourage organizations from paying individuals -- like, say, their board of directors -- money that could go into the company, or create perverse incentives to run it into the ground to grab a quick buck.

And you can devote said money into programs to help those who can't help it that they're not rich and have a hedge fund.
 
The key points to taxing the rich more are twofold; First, there is the argument that since they have gotten so much more out of the economic system they exist in, they owe more back to maintain that system. They would not be millionaires if there weren't many more workers and clerks to support them. Second, there is the argument that they do not need all that money to fill their basic requirements, a millionaire can afford to lose half his wealth far better than someone pulling in a low five figures. This seems less persuasive to me, but it is factually true.

OTOH, the argument against taxing the rich more is that above a certain level of taxation, they just won't pay their taxes; the super-rich, say the top 0.5-2% of the population, are rich enough to have the resources (in terms of accountants and lawyers) to evade extremely high rates of taxation.

Think in terms of tax havens and 'creative accounting'.

Much of the reduction in top tax rates since the 1960's in almost all Western nations has been due to the realisation that in an increasingly globalised world (remembering of course that whilst economic liberalisation and globalisation is commonly seems as a post-1973 phenonmenon, it has really been going on to a degree since 1945 and in particular since the late `950's), there comes a point where if you tax the super-rich too much, they will take their money elsewhere.

Far better to lower the tax rate and collect some revenue, than have a high tax rate and collect less (because it has been moved off-shore).
 
[QUOTE]Plus, it acts to discourage organizations from paying individuals -- like, say, their board of directors -- money that could go into the company, or create perverse incentives to run it into the ground to grab a quick buck.[/QUOTE]

And you can devote said money into programs to help those who can't help it that they're not rich and have a hedge fund.

I should probably say I meant to say that high tax rates reduce perverse incentives by discouraging large paychecks for guys running the company.

And I think Sa'id is agreeing with me... right?
 
But of course. I believe a man deserves the opportunity to earn a good living but to a certain point. Corporate executives don't need to earn the money that they're earning now so yes.
 
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