How would a tax rate of 100% work?

[What_the]

Presumably, businesses who would otherwise have been paying over a million would be more profitable and pay more taxes.

Either that or they would reduce their prices which might be a good thing for consumers.

I assume that’s what advocates might argue. Overall I think it would still be a net bad thing.

[md2000]

@What_the

Presumably, businesses who would otherwise have been paying over a million would be more profitable and pay more taxes.

Either that or they would reduce their prices which might be a good thing for consumers.

I assume that’s what advocates might argue. Overall I think it would still be a net bad thing.

Or pay their other workers more, and put more effort into retaining the good workers, giving them more training, and all the other investments that help (Like sending more of the employees to more conferences in Hawaii.) Never underestimate the value of a business jet as a legitimate expense too. Also owning a condo in LA and NYC to put up the execs when they have to go there for “business reasons”. Fully stocked bar in the executive lounge, etc.

[vonespy]

I don’t think that a 100% tax rate would exist in a vacuum. The government would use that rate to encourage the behavior that they want on the part of the people who would hit the 100% tax rate. For example, if the government wants to encourage more investment in local manufacturing, every dollar invested in manufacturing would come with a 50% rebate on taxes. Or every dollar would increase the cap at which the 100% tax rate is charged so that more funds have a lower tax rate.

So the high earners would have the choice of losing everything over $X or investing the over $X money in something that would give them some of the over $X back.

[Colibri]

@Babale

You gotta hand it to people like McCarthy – they’ve had a lasting impact on the American consciousness. One of the presidents generally recognized as “great” by the American public said that in 1942. Just a few short years later, they were tossing “commies” in jail, and look at us today! “Socialism” is still a bad word.

Moderator Note

Keep the political commentary out of General Questions. No warning issued,

Colibri
General Questions Moderator

[Banksiaman]

@Little_Nemo

He also wasn’t Paul McCartney when he wrote that. He was George Harrison.

Was that when he was dead?

[RioRico]

@doreen

I found this quote-

At a time of “grave national danger,” Roosevelt told Congress in April 1942, “no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year.”

So it’s a marginal tax rate of 100% on all income over $25K , in effect putting a cap on net income.

April 1942. US had been at war 4+ months. FDR proposed an income cap because US rather needed the money. Congress did not enact it. A similar emergency, a fucking real existential crisis, will likely generate similar proposals. Who should be getting richer while your family is dying?

Dealing with a pandemic is not warfare and calling it such treats it as a PR problem, not a medical calamity. Spend what is necessary for survival. Tax what is necessary to spend. Survive.

[RivkahChaya]

@Banksiaman

Was that when he was dead?

Yeah. That’s what he did when he was dead-- he traveled through another dimension, where he went into the body of a was a rabid anti-communist American senator from Wisconsin who, after recovering from the cardiac event that sent him to the ER started the HUAC and got most entertainers, including the insanely popular folk-rock group the Weavers, and generally promoted cultural conservatism in the US along with political, as a means of keeping out communism. So by the time that he reappeared, he had entirely altered the past, and the beatles had become a breakthrough brand the threw off the yoke of conservatism.

This fomented a youth movement against everything the previous generation had stood for, which spilled onto hatred of Vietnam.

This is also the source of McCartney’s aversion to hard drugs, and his limited us of pot, compared to the other Beatles. In his life as McCarthy, had been an alcoholic and cocaine user, who died of his alcoholism.

He was allowed to resurrect himself as Paul McCartney, in order to try to bring his anti-drug messsge to the other Beatles, but in that he failed. Still, he remains an example for other people in the industry of how far you can if stay off drugs.

[road_lobo]

@bob_2

There’s a reason why Phil Collins, David Bowie, Lewis Hamilton et al live in Switzerland.

David Bowie doesn’t live in Switzerland…

[Little_Nemo]

@Banksiaman

Was that when he was dead?

I don’t know. I never studied coleopterology.

[Banksiaman]

@RivkahChaya

Yeah. That’s what he did when he was dead-- he traveled through another dimension, where he went into the body of a was a rabid anti-communist American senator from Wisconsin who, after recovering from the cardiac event that sent him to the ER started the HUAC and got most entertainers, including the insanely popular folk-rock group the Weavers, and generally promoted cultural conservatism in the US along with political, as a means of keeping out communism. So by the time that he reappeared, he had entirely altered the past, and the beatles had become a breakthrough brand the threw off the yoke of conservatism.

This fomented a youth movement against everything the previous generation had stood for, which spilled onto hatred of Vietnam.

This is also the source of McCartney’s aversion to hard drugs, and his limited us of pot, compared to the other Beatles. In his life as McCarthy, had been an alcoholic and cocaine user, who died of his alcoholism.

He was allowed to resurrect himself as Paul McCartney, in order to try to bring his anti-drug messsge to the other Beatles, but in that he failed. Still, he remains an example for other people in the industry of how far you can if stay off drugs.

I thought so! Forming Wings was probably the only thing he could do to top that.

[BrotherCadfael]

@RivkahChaya

Yeah. That’s what he did when he was dead-- he traveled through another dimension, where he went into the body of a was a rabid anti-communist American senator from Wisconsin who, after recovering from the cardiac event that sent him to the ER started the HUAC and got most entertainers, including the insanely popular folk-rock group the Weavers, and generally promoted cultural conservatism in the US along with political, as a means of keeping out communism. So by the time that he reappeared, he had entirely altered the past, and the beatles had become a breakthrough brand the threw off the yoke of conservatism.

This fomented a youth movement against everything the previous generation had stood for, which spilled onto hatred of Vietnam.

This is also the source of McCartney’s aversion to hard drugs, and his limited us of pot, compared to the other Beatles. In his life as McCarthy, had been an alcoholic and cocaine user, who died of his alcoholism.

He was allowed to resurrect himself as Paul McCartney, in order to try to bring his anti-drug messsge to the other Beatles, but in that he failed. Still, he remains an example for other people in the industry of how far you can if stay off drugs.

He spent a year dead for tax reasons.

[vonespy]

@BrotherCadfael

He spent a year dead for tax reasons.

Unexpected Douglas Adams.

[DrDeth]

@doreen

I found this quote-
So it’s a marginal tax rate of 100% on all income over $25K , in effect putting a cap on net income.

And note that critical word- “NET”- or in this case- taxable.

My Taxable Income is about Half of my AGI. ymmv.

So, like Little Nemo and other mention, about the Marginal tax rate, but also remember that that tax rate is on taxable income.

Let’s take a much more real example: 100% tax rate on income of $1Million.

And- OMG, I earn TWO million, they will take it all away!:eek:

But your TI is only 1,000,100 and the marginal rates are:

up to 10000- 0
10-50- 10%
50-100K- 25%
100-1Mill- 50%
1Mill- 100%

So, even tho you may think you will pay $2million in taxes, you will actually only pay that 100% tax rate on that last $100. You will pay close to 25% on your gross $2M income, or $500K, which is quite reasonable.

[Muddibog]

@Velocity

I assume this means the marginal bracket system, which we use today.

So a 100% tax on all income above, say, a million dollars per year, would be something like this (totally hypothetically):

Income from $0-50,000: 10% tax
Income from $50,000-100,000: 20% tax
Income from $100,000-500,000: 30% tax
Income from $500,000-1 million: 40% tax
Income above $1 million: 100% tax
The effect of it would be that nobody in their right mind would ask for a salary above $1 million (such as NFL athletes, etc.) since none of that money would go into their pocket, it would all be siphoned off by Uncle Sam.
So to use a hypothetical example, let’s say **Muddibog **the star NFL quarterback is paid ten million dollars a year. In that case, he forfeits $9,335,000 in taxes, and gets to take home $665,000 as final net take-home pay.

So, if Muddibog takes home $665,000, does that mean that in addition to having a net cap on every dollar that exceeds 1 million, the remaining 1 million dollars are taxed at 40%? Or why would I take home $665,000?

[Chronos]

Some of the 1 million dollars are taxed at 40%. Some of them are taxed at less than that.

Using the hypothetical bracket structure that Velocity described, he’d pay 10% tax on $50,000 (or $5,000 tax), then 20% tax on another $50,000 ($10,000 more), then 30% tax on another $400,000 ($120,000), then 40% tax on another $500,000 ($200,000). His total tax for those first million dollars would be $200,000 + $120,000 + $10,000 + $5,000, for a total of $335,000.

[DrDeth]

@Velocity

I assume this means the marginal bracket system, which we use today.

So a 100% tax on all income above, say, a million dollars per year, would be something like this (totally hypothetically):

Income from $0-50,000: 10% tax
Income from $50,000-100,000: 20% tax
Income from $100,000-500,000: 30% tax
Income from $500,000-1 million: 40% tax
Income above $1 million: 100% tax
The effect of it would be that nobody in their right mind would ask for a salary above $1 million (such as NFL athletes, etc.) since none of that money would go into their pocket, it would all be siphoned off by Uncle Sam…

Umm, no.

You are confusing Gross Income with Taxable income. For example- that NFL athlete could send a lot into retirement plans, and reduce his TI. Or a legit tax shelter.

[md2000]

Having a taxable-income-deductible retirement savings plan makes a lot of sense for a pro athlete - if you would make several million a year from, say, age 20 to 40 and nothing much after that, then transferring a significant amount to future earnings would greatly limit that tax. Whereas if you owed MicroGoogleZon and expected millions a year for life, better find another way to enjoy you untold millions instead of paying it to yourself as a salary. As I said, a corporate jet would be a big start. Then arranging assorted philanthropic PR stunts for the corporation in vacation-desirable locations several times a year, all (business!) expenses paid.

[Patch]

Ok, so this thread would be the place to ask, then.

ISTR reading once, long ago, that Sweden had an upper tax rate of 106%, and you had doctors who, when reaching that income point, stopped working for the year. Any truth to that?

I have no idea when I read that, or where, just that it was some time ago.

[Hellestal]

@Patch

Ok, so this thread would be the place to ask, then.

ISTR reading once, long ago, that Sweden had an upper tax rate of 106%, and you had doctors who, when reaching that income point, stopped working for the year. Any truth to that?

I have no idea when I read that, or where, just that it was some time ago.

In the 1970s, Sweden levied an extremely high marginal tax rate, plus the stipulation that self-employed people had to pay the “employer” portion of taxes, in addition to the usual employee portion. In total, the result was briefly a marginal rate of 102%.

[puddleglum]

@md2000

Having a taxable-income-deductible retirement savings plan makes a lot of sense for a pro athlete - if you would make several million a year from, say, age 20 to 40 and nothing much after that, then transferring a significant amount to future earnings would greatly limit that tax. Whereas if you owed MicroGoogleZon and expected millions a year for life, better find another way to enjoy you untold millions instead of paying it to yourself as a salary. As I said, a corporate jet would be a big start. Then arranging assorted philanthropic PR stunts for the corporation in vacation-desirable locations several times a year, all (business!) expenses paid.

Isn’t the contribution limit $7,000. At a salary of several million, that is not much tax avoidance.