What part of capital-gain and income are you not clear about? If you sell a house worth $10M you probably paid something for it. The capital-gain is the selling price minus the buying price. That is the income on which you would pay tax.
Are we really a nation of Joe the Plumbers who don’t know the difference between gross and net?
Maybve it would result in a stable enviroment in which people are paid for their long term results rather than trying any wild ass scheme to make a buck today even if the long term results of their activities is bankruptcy.
You know that the Japanese are beating the shit out of us in areas in which their CEOs make a small fraction of what ours do?
Are we really a nation of illiterates that don’t know how to read? 
I believe Simplicio’s answer was already in the context of capital gain. I read it as “1.6 million of the [capital gain] of the sale.”
Well they have their own economic problems, to put it lightly, and a lot of them come from prizing seniority over results, which is similar to the kind of ethic you’re promoting.
Work effort and innovative effort would absolutely take a hit for those whose incomes would be over the cap. And if someone has made $50 million, then they’ve done some pretty spectacular things (with the exception of those that just popped out of a spectacular vagina), so society would be much much much worse off if you discouraged that person from working or innovating.
Ok, wheras most other people saw fit to answer with at least an anecdote or example of how the disincentive mechanism would work, you just flatly assert it to be true. it’s less than convincing.
but let’s go on with this “i made 50 mil a year, so i had to have done something spectacular” logic… another flat-out claim that doesn’t exactly comport with reality.
I’m not sure what you are looking for here. If the cap is $50 million per year, and I make $50 mllion a year, I’m sure as hell not going to work harder or sit around and think of an idea to make even a dollar more of income.
I don’t understand this either. It is axiomatic that people give money to someone else because they believe they are receiving value in return. Therefore, unless the person making the money has stolen it, he provided value in exchange for it. A person that makes $50 million per year provides a shitload of value to other people and shouldn’t be discouraged to not provide additional value.
Minimum wage these days is $7.25/hour. Most workers don’t do anything spectacular that’s actually worth $7.25 – in reality they are only worth $4.00/hour. Now that I’ve said such a sentence to clarify what my version of “reality” is, now what?
Btw, if you happen to be talking about inherited wealth, do you realize that most millionaires earned their wealth instead of inheriting it?
http://www.nytimes.com/books/first/s/stanley-millionaire.html
But studies find no link between US CEO compensation and results.
Voyager hit this a while back. Unfortunately, he only half-understands the basic concept. You did get close, Voy, but not enough.
The marginal value of each dollar may be less, but the marginal value of each relative amount may be much greater. That is, many people who make good or great money may be much more pleased to get an increase of, say, 5% or 10% compared to a lower-income person. They’ve probably worked hard to get it and want to keep earning it. Money is part of their status and self-image. Moreover, people being paid more are almost always paid more because they are creating value and therefore wealth for the rest of us.
Of course, on your other issue (minimum wage), I have notihng but contempt. It is a self-righteous morase of rakn stupidity and utter economic ignorance piled atop shallow self-indulgence. And that’s what I say about it on my nice days.
I am all for returning to the confiscatory tax schedule of the '50s. Of course, back then, the general aspiration was for a decent house near good schools and maybe a bigger car than the folks next door. Since Reagan, tho, greed and it’s attendent ridiculous consumption have become enshrined in the public mind as a virtue and the argument is presented that without this carrot, we would experience, at best, economic and technological stagnation along with moral decay.
Not necessarily so, I would maintain. Imagine a society that valued contribution to society more than selfishness. How would the entrepreneur in each of us be encouraged rather than repressed? How about an annual Taxpayer Of The Year Awards Dinner. The top ten taxpayers are feted, publicly thanked and congratulated and the winner is awarded the Medal of Freedom. Think of it as The Great American Potlatch.
I’ve seen this cited a lot lately. Meaning, tax rates were higher in the 1950’s, and Life Was Good for the Middle Class in the 1950’s, therefore
Higher tax rates = LWG ft MC
I’ll move past the obvious point that correlation does not equal causation. Correlations can be helpful as an identifying first point - I use them myself.
But then you have to follow it up with a plausible explanation as to WHY your first point caused your second point, and HOW did it work?
So I’ll ask you…
WHY would higher tax rates on wealthy investors, entrepreneurs and wage-earners, which (I think) we’ve already agreed in this thread changes behavior and
WHY would an increasing amount of $$ flowing to the government coffers (if indeed that is the case, but I’m not arguing that now)
cause Life To Be Good for the Middle Class?
And HOW does that work?
I’ll bite. Increasing govt revenue would allow is to balnce the budget and eliminate the huge percentage of our tax dollars dedicated to paying off the debt. That money could then be used to have better education that would allow our students to comepete globally. We could rebuild our crumbling infrastructure of roads, bridges, and railroads. We could once again invest in govt research that led to huge advances in medicine, computers, and aero-space. We could develop new energy sources that would prevent us from sending billions of dollars a year to countries that want to kill us.
I’m not talking about what could be. I’m talking about what was.
Why would higher tax rates in the 1950’s cause Life to Be Good for the Middle Class?
I’ll also move past the obvious point that the Middle Class in the 1950’s, on average
Let’s not even go there.
The poster above, as well as other posters on this Board, cite Gini coefficients as evidence in itself and an end to the argument. As if that by itself proves that life was good in the 1950’s and it was all due to higher tax rates.
I’m not arguing with some of your example above. There are snippets in there that I’ve argued myself. I would also posit that the things you cite are a tiny % of the federal budget and could be addressed right now, with a few other tradeoffs made along the way. They don’t require higher taxes.
But let’s not go there either. At least right now.
I’m asking WHY and HOW higher marginal tax rates in the 1950’s caused Life to Be Good for the Middle Class.
There is probably no economist who could address that question (pro or con) completely. But in addition to that obvious Gini correlation, it seems self-evident that no matter how corruptly and inefficiently the govt accomplishes it, it would redistribute more money to the middle/lower classes than would an individual buying a new Bentley and hiring a personal chef.
That’s not at all self-evident to me (and I’m not sure exactly why the Gini coefficient matters here).
To those who believe, it is; to those who don’t, it isn’t. And it makes no difference what the question is; few change their minds. Some good laughs, tho.
So is that your argument? That in the 1950’s, the federal government redistributed income to the middle class, thereby improving their lives?
There should be data available to support or refute that. So let’s take a look…
You can still say this with a straight face after the recent meltdown? if CEO compensation was tied to long term results, sure, but it clearly isn’t.
Now, CEOs definitely get into pissing contests with each other to increase their relative prestige by having the highest salary. It is not clear how this contributes to shareholder value. As Dan Ariely noted, the climb in CEO salaries began when they got published in the mistaken notion that CEOs would be ashamed if they made too much.
You have any data showing that a 10% raise for a rich person is more satisfying than a 10% raise for a poor one? if you admit that the incremental value of a dollar is smaller for a rich person, this would only be true if the value goes down less than linearly. I’m not rich, but I make enough so that bonuses that would make people excited on a game show get filed with a yawn. Anyhow, no one gets to the level the OP is interested in from 10% raises - they get there from 100% raises. The question isn’t whether this much love makes them shoot all over their pants, it is whether they would put their nose to the solid gold grindstone for $30 million instead of $50 million. It is crucial that everyone is in the same boat - seeing the CEO across the street make a lot more for the same effort might well be demotivating. However, I always glance at CEO pay for Silicon Valley the Murky News publishes, and there if very little correlation between company results and CEO effectiveness and total compensation. Some Silicon Valley CEOs seem happy with their $10 million pittances.
I’m not interested in the rights and wrongs of the minimum wage. I’m only interested if the same great motivating factor you find at the top also applies to the bottom. Or are you of the opinion that people down there are such moronic trogs that even the minimum wage is charity?