Nobody? That’s a bit of a strong statement there. And even if not many people were discouraged from working, plenty of people were encouraged to move abroad in order to avoid the tax. This is all before my time, and taxes have never really been that interesting to me unless they affect my own income, but I think its probably fair to say that the argument about very high (70%+) rates of taxation is far from settled.
Given that it’s commonly accepted that high marginal rates of taxes built into the tax/welfare combination are enough to stop the poor and the middle classes from chasing extra income, I don’t see why the wealthy should be any different. The fact that their income may be easier to earn is probably balanced by the fact that they already have lots of money and therefore less incentive to chase more.
I couldn’t agree more. Unless government revenues cover all interest payments plus some capital repayments, and those revenues are sustainable in the long term, it’s all going to go horribly horribly wrong sooner or later.
I’ll admit I’m no Whiz Kid when it comes to understanding governmental budgets, spending, or the like. But if we’re talking fiscal responsibility, I think it’s pretty easy to understand. Like the family budget, you want to put the money you have into areas that are most important to you, and get the most for the dollars you DO have.
When I look at the amount of money we spend on bombs and other military stuff, I can’t help but think that someone’s in bed with someone in the contracting office. We will never fly all the planes we have. We’ll never drop all the bombs we have (and yet it’s like pulling teeth to get a properly equipped armored vehicle or body armor for guys who drive down Terrorist Bomb Boulevard every day). The veterans of our country are under-funded with regard to healthcare. They spend so irresponsibly in this and so many other areas that it appears they have virtually no experience in financial matters or they simply don’t care about the welfare of our nation.
I’m using military spending as an example, but if the money was spent appropriately, we wouldn’t have the degree of underfunding in so many other areas of importance to the country. How can we have the supposed best and brightest minds on the planet and still suffer some of the worst financial mismagement imaginable?
I’m sure someone will chime in with reasons, excuses, or explanations using terminology I’ll never understand. I shall try to follow along.
That helps focus the point I made in my previous message. If I had the same power to raise my pay that the government has to raise taxes, I would be able to buy myself quite a lot more stuff than I do – but it would not be fiscally responsbile to just go ahead and do so, notwithstanding the fact that I could pay for it all.
If you look at the Federal Budget Historical Tables then you will see that in real terms (i.e., corrected for inflation), federal revenues aren’t forecast by the Bush Administration to exceed their 2000 level until 2008 (Table 1.3). The revenues specifically from personal income taxes are not forecast to exceed their 2000 level until 2009 (Table 2.1 using the composite deflator in Table 1.3). And, note that in 8 or 9 years, there is probably significant population growth. If you looked at real revenues per capita, you’d have to wait even longer to see them exceed year 2000 values. [Our population growth rate is an estimated 0.91% per year, which means it wouldn’t be until 2010 that the total real federal revenues per capita exceeds the year 2000 values.]
Especially if the stuff you buy are stink bombs to hurl at the guy next door. On the other hand, raising your pay to fix up your house or educate your kids is a good investment. And virtuously not raising your pay when your kids are going hungry, or not going to the doctor because you can’t afford it, makes no sense.
And if you are buying the stink bombs while your kids are going hungry it’s criminally irresponsible.
I’m not aware that’s commonly accepted. I’ve never heard that before, in fact.
I mean, if you want to say that welfare has prevented some people from seeking emplyment, because they take away welfare as you earn income, that’s a huge marginal rate. In Illinois, every dollar of income loses $.50 of welfare. On top of that, you’ve got whatever income tax the oncome is being taxed at. In many peoples’ case, it’s worthwhile to use that time you would be earning minimum wage or thereabouts to look for a better job. So you’re still chasing extra dollars, but thinking middle-to-long term instead of short term. I did that when I was laid off a few years ago. I did some temping, but also took a lot of time to take computer classes and apply for and pursue tech jobs. It’s paid off for me (and the state and the feds) that I went that route. But never was I discouraged from working more because the tax rates were high. I’d have done what I did even if the income I’d made temping weren’t taxed at all.
Or are you talking about something else when you say high marginal rates stop people from earning extra income?
The part that pisses me off is that you can have all the stink bombs you need and still feed the kids! Why do you have to have ALL the stink bombs when just a bushel full will do? The other kids on the block hardly have the ability to buy stink bombs, let alone wing 'em over the fence at you.
That’s exactly what I’m saying. Whether the cause is taxation or removal of other income such as subsidies or welfare, a situation where an increase in work earnings of $1 leads to a net increase in retained income of $0.50 or less reduces the incentive to work, irrespective of the income level. Depending on the circumstances of the affected worker, it may or may not affect their behaviour.
Err… So you weren’t discouraged by an effective tax rate of 50%, and you would also not have been discouraged by a rate of 0%? Well, that’s certainly consistent with mainstream economic thought, but what about if you had only received 5 cents out of every dollar you’d earned temping? Would you still have been quite so keen on that 40-hour week?
I’d be interested to know if you would support withdrawing welfare benefits at a rate of $0.95 for every $1 earned, since you think that a tax rate of 95% has no effect on people’s desire to earn more.