Do you really, honestly, believe that work effort/innovative effort would take a hit if maximum income in a given year was capped. Let’s imagine a system where the maximal income anyone could earn a year would be a ceiling that covered 99.5% of
all income earners - so pretty damn high.
This is almost a necessary condition of certain posters’ political persuasions, namely that for some strange reason if Middle Class Guy X can no longer chase the dream (and lets face it, it’s a dream) of making 50 million dollars in a year, he’ll suddenly decide to stop making widgets and become a lazy welfare bum because, you know, his life aspirations were just ripped from him like an evil nanny ripping a child’s teddy bear from the clutches of a toddler. I really, truly don’t see it.
EDIT: I’m not looking for polemics from posters on how imposing such a regime would have dire macroeconomic consequences. I’m just interested on the “work effort” aspect.
Speak respectfully of a man you are not fit to sharpen pencils for.
Point was that we value respect and community standing, or we used to. Indeed, we used to pay people with respect, to some degree. Everybody knew that teachers and clerics weren’t well paid, but they were valued. Even doctors!
When I was a youngster, studying for the penitentiary, I had Dr. Collins (May the Goddess rest him in Her bounteous bosom). He drove a second hand car not much better than our own, his clothes were ordinary, and he drove that second hand car to our house whenever my grandmother was sure I was deathly ill.
Money is the cynics coin because, as Oscar Wilde said, the cynic knows the price of everything but the value of nothing.
Have you ever heard of Stakhanovites? These were “heroes” of the Soviet state who voluntarily worked extra on behalf of the Revolution. The character of Boxer in Orwell’s *Animal Farm *reflects the Stakhanovite ethos.
I admire such people, in the sense of not measuring well in comparison. I don’t pretend I am one of them, but if one of them needs help, I’ll come-a-running.
I wonder about this too. Is Warren Buffet or George Soros really going into the office so they add a couple more millions to their billions of dollars?
That said, there aren’t that many billionaires, and a lot of those billionaires are probably earning through capital-gains rather then income. If I’m reading this wikipedia page right, the top 99.9% part of the population start around 1.6 million a year. Hardly chump change, but I can see if they really want to put that extra wing on the mansion, it might still be worth it to go put in some few extra effort to bump that up to two million.
I’m using the Internal Revenue Code’s definition of income, which includes all monies received by a person from whatever source unless specifically exempted from inclusion as income. Capital Gains are income.
EDIT: sorry if that wasn’t obvious - I didn’t think to mention that “income” meant “almost everything”
Don’t know who’s quote it is, but its something like if you have a hundred dollars, making a thousand dollars is very difficult, if you have a million dollars, making a thousand dollars is pretty much inevitable.
Hmm, but then if I own a house worth 10 million dollars, I can only keep 1.6 million from the sale of it since anything else would be above the cap? Seems like that would create some really huge distortions in the market (as well as a big incentive to create all sorts of closed-door deals to try and profit from the sale of your house in a way that doesn’t trigger the cap).
I bill by the hour and it’s a very high amount by most people’s standards. I consider myself overpaid. Nevertheless…
The client I bill has a limit per month they can pay which “caps” my earning potential. Because of the heavy workload, I sometimes hit the billable ceiling by the 4th week of the month. At that point, there’s often still some work to do but I shut down psychologically. If I continue working at that juncture, I’m doing it for “free.” I excuse myself from more conference calls or just tell the client I’m done for the rest of the month and will take some days off. They can call me if there’s an emergency, but otherwise, I’m on vacation. If the work is really really important, they will simply pre-approve the hours overage. I do work from time to time “off-the-clock” to keep good client relations but this is something I try to minimize; I’d just simply rather be doing something else if my salary has already been capped that month.
When a new month and starts, the billable ceiling is reset and I’m back in the game again to earn more money.
To me, this is psychology 101 with regards to expending effort in relation to earning income and my response to financial incentives should not be regarded as unique.
I’ve been in a room where the senior partner told a bunch of lawyers that bill $600 an hour that they have to work Saturday and they can’t bill the client for it. There were very unhappy faces. Even though they are in the top 1% income percentile, they still want to be paid for each hour they work.
In it, you made one post where you essentially said a cardiologist trades off the risk of being sued for great amounts vs the rewards of significant compensation, and decides it is worth it.
In other words, there was a conscious decision made by a cardiologist at some point to invest a marginal amount of his effort, or resources, to do his work that was weighed against the risk of failure. He/She decided it was worth it, and then pressed on.
It isn’t the greatest example, but I wasn’t going to spend all day searching your past posts. It will suffice for now.
I’m also going to assume that you support some of the following
Cash for clunkers
Cap-and-trade and the Obama administration’s push to create ‘green jobs’
The stimulus bill (with it’s Keynesian multiplier)
The mortgage servicing plan for foreclosure mitigation
The House version of the healthcare bill
All of those plans intended effects are rooted in some combination of
Restrictions on certain activities, thereby driving up costs of things deemed ‘undesirable’
Subsidies or relaxations on things deemed desirable, in order to have more of them
So if you support some/all of those bills, you have subscribed to the notion that incentives matter. If you make it harder and more costly to do certain things, or easier and more profitable to do other things, people will change their behavior accordingly to produce different outcomes.
If that’s not the case, please correct me.
Now Sam Stone, myself, Shodan, Scylla, Ruminator and a few others will chime in from time to time and say No - that plan won’t work, and it might make things worse. Then we argue X or Y against the ‘other side’, who argues A or B.
I’m not worried at the moment about who’s right or wrong in those debates. What I’m focusing on is the fact that both sides can agree that restrictions and/or subsidies will change behavior.
Now above, in your OP thread, you seem to be making the claim that increasing the cost of earning income will have NO effect. That your hypothetical person will just keep on doing what they were doing before, with no change.
I hope you can see how inconsistent that is. You can’t have it both ways. You can’t support certain things where you believe changes in incentives will change behavior, and then claim in other instances that they won’t.
Either they will or they won’t. We can debate degrees, levels of effectiveness, subtle second-order effects that are not obvious, etc. but to baldly claim that nobody will change their behavior based on higher tax rates is flat-out disingenuous.
Yes, there is a large work effort disincentive when you’ve got a low ceiling. My position would be that the top .5% wage earners are not at that ceiling.
Ok, maybe the top .5% is too low… my question is more a thought experiment aimed at this mythology that if you prohibit people from earning more than (for an example) 1000times the minimum wage in a year that work effort would suddenly cease.
I mean we had 80% marginal tax rates 40 years ago. Wouldn’t people from those eras bemoan how lazy we’ve gotten as a society? That suggests that there was a strong work ethic back then, even in light of a tax regime that is awfully close to a wage ceiling.
No CEO sits around and says “yes, I really worked hard and earned my 1 million dollars today”, do they?
I think it’s not really separable though. Part of the reason people work is to buy stuff, and part of the reason they buy stuff is to realize gains when it increases in value. If I can’t realize those gains, my incentive to earn money even under the cap takes a hit.
For example, if I earn 1.6 million a year for three years to buy a mansion for 4.8 million, then there is no way I’ll ever be able to get that money back out again. So my reason for working to earn the original 1.6 million is gone, even though I never touched the cap.
Ok, mr. literal. yes, i don’t believe that it will have no effect. it is my position that it will have an infinitesimally small effect. are you happy now?
First of all, how much income does the 99.5th percentile make? Let’s get a number on that before we start talking about Buffets and Gateses. According to the wiki page, the 98.5th percentile makes $250,000, which is well within the high-skilled professional class’s wages, or the return to a small entrepreneur after several years of effort. So we would see reduced efforts in entrepreneurship (bad), fewer lawyers (good), and fewer doctors (bad).
What will the macro-level effects be? Let’s look at US vs. European rates of growth.
Note furthermore that this differential in economic growth is occurring in an world that is increasingly globalized, where telecommunications makes it easier to export innovations from innovative countries to less productive ones. Thus Europe’s lagging is happening despite the fact that they can import the fruits of American innovation! If they existed in a vacuum, social democracies would be even worse off.
It is true that part of this European sluggishness might be accounted for by heavy entitlement spending on the unemployed, not higher taxation per se. However, higher entitlement spending is a likely outcome of greater tax revenues, and leftists usually espouse the two as a package anyway.
Great. Everyone agrees that incentives at relatively low wages (and at the top 0.5% even the average cardiologist makes low wages) are important. I trust that everyone would encourage an increase in the minimum wage to give that mass of people incentives also. But, I seem to have missed the answer to the question of how this works up in the stratosphere, where the value of an incremental dollar of income is fairly tiny.
I don’t think it would make a heck of a lot of difference, myself, and by censoring the upside benefit, not the downside risk, it might even make the highly paid a bit more cautious with the futures of their companies.
Delighted. Ecstatic. Head-over-heels with glee. I’m going to call up my parents, my colleagues, and wake up my friends overseas and tell them how happy I am.
It’s clear from your language and your post that you really don’t have any interest in debating this. And your claims are already so simple, and shallow, that I doubt you even have much understanding of what you’re talking about.
For example, why shouldn’t you raise taxes on everybody then? Including middle income families in America, who already have a standard of living significantly higher than about 99+% of the rest of the world’s population. How about small businesses? Let’s raise the taxes on them, too. That shouldn’t matter, right? It should have an ‘infinitesimally small effect’, right?
I suspect when you claim it will have an ‘infinitesimally small effect’, you really mean that it will have an ‘infinitesimally small effect’ on whatever groups you have already deemed unworthy.
I suspect you might think it will have a significantly larger effect on groups that you sympathize with.
two points that i’d like to clear up (but I don’t know your source so i’ll wait for a response)
a) I am not sure that the figures you cite are for employment income or income income.
b) the nature of a normal distribution means that there is an asston of difference between the value for a 98.5th percentile and a 99.5th percentile. i’m sure someone with calculus could figure that out better