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Comment by state_less | Hacker News Reader

I wasn't a big fan of the tax cuts, even though I'll see the proceeds from them. Some think that the less you pay, the better, all the way to zero. In my view, taxes are like porridge, you don't want it too hot or too cold. The best amount is not too little or too much. I too worry about the deficit and think we need to tax the biggest gainers a bit more and provide safety nets for the economic losers so they can breath easy and participate in the economy a little more than just sustenance levels. As we've written and read about here in the past, it's expensive to to be poor (e.g. visiting the ER vs. early prevention, overdraft fees, etc). That may not be what you like to hear, but I also don't think we should tax the gainers too much either. There needs to be an incentive to to do well and I'd be against cutting into that too deeply.

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I quite like your reasonable, balanced approach. I've always been curious about your last point though:

> There needs to be an incentive to to do well and I'd be against cutting into that too deeply.

I've never understood why any tax rate would be a disincentive to do well. Even if the tax rate was 90%, doing well is doing well. If I make more money, I get to keep more money, even if taxes are high.

If we have tax brackets, then yeah sure there could be an unlucky minority of people who just barely land in a higher bracket than someone just under the line, so they pay a higher percentage than someone else.

But if you're well above the threshold, the amount you keep is more the more money you make before taxes. Isn't the primary incentive at all times to make more money, regardless of taxes? Or is the idea of paying a higher percentage than someone else a strong enough motivator to actually keep people from trying? Or am I missing something?

Marginal return. If working an extra hour per day will give me $100 pre-tax, tax rate being 10% and 90% will largely determine whether I'd do the extra work, versus spending that hour with family etc. Everyone has different threshold for pay/fun ratios but overall society will be less productive as tax rates go up at least in the static sense (not considering tax money being put into productivity-increasing use).

If people make enough to retire every three years at a 0% tax rate, then most people will retire or switch to a less productive hobby job, because the marginal utility of more money approaches zero after three years.

Tax those same people 90%, and they’ll work for 30 years.

There is evidence of this phenomenon from the early days of the automobile: Craftsmen building cars by hand could and did retire after a few dozen cars, further inflating wages by constricting demand of labor. In contrast, Ford’s screw-turning factory workers worked for decades.

I don’t buy that lowering effective wages decreases the number of hours most people will be willing to work.

Individually, maybe. Let alone the ethical implication of 'tax them high enough so they don't retire early', artificially lowering the income of a trade would - to your point - constrict *supply of labor. And of course this would lower the total productivity of the industry and society.

And the Ford example, while interesting, doesn't have to do with taxes does it? It has to do with Ford lowering the barrier of entry for factory workers AND increasing productivity rate at the same time. I think we can all agree that that advancement was good for society as a whole?

Am I understanding you correctly? Or is there something I am missing?

Say you’re a freelancer and could do one more project but the marginal tax rate is going to be 90%, vs. being maybe ~50% on the previous project you did. So now you’d be doing the same work for 1/5th of the income. Wouldn’t you consider saying “screw this, I’m going on a vacation?”

As the tax rate increases, the value you get for increasing your income goes down proportionally.

I think if you take it to the limit, you can see the effect more clearly. As the tax rate approaches 100%, say 99%, then even if I make $100,000 before taxes, I'd only keep $1,000. If I push myself hard to earn $200,000, I'd get to keep $2,000. Yes it is still double, and I am doing better, but not much of interest changes in my life and I personally wouldn't say I'm doing well. I can barely afford to take that second vacation, or see much value for my efforts. My efforts are simply less rewarded, giving me less tangible reason to make the extra effort. I think this would kill off the incentive to create wealth in the economy.

Wealth is needed to take care of basic needs, so it would be self defeating if you were trying to take care of everyones needs and make sure they had a little spending money to participate in the economy.

Somewhat as an aside, I didn't consider what benefits I would receive for paying a 99% tax rate, presumably it would be all the basic needs plus some more, but this would start to feel like a planned economy where individuals, with their small discretionary funds, would't have as much input into what is created in the economy, rather it'd be a course political process which could be slow to meet the needs of the citizens, or fraught with other unforeseen difficulties.

Ah yes for the working class, I can see a 99% tax rate would very likely have this effect. I'm still wondering if we stayed in more realistic ranges, is a 40% tax rate, or even a very high 60% tax rate by US standards, a real disincentive to earning more money? I feel like it would take a pretty high tax rate before I stopped caring about my income. Does it actually have that effect in Norway, for example?

I realized I'm also mixing a few different thoughts in my head. I've heard the high taxes being an economic disincentive idea applied to the rich and to corporations and to investors, and I think my question applies more to them than to the middle class. You weren't talking about only the rich, I think I'm projecting a little bit.

Is the idea for businesses and investors that with higher taxes, in the aggregate there are always alternative places for the money, and so behavior changes statistically as tax rates increase? Maybe I'm interpreting "incentive" too literally.

> Ah yes for the working class, I can see a 99% tax rate would very likely have this effect. I'm still wondering if we stayed in more realistic ranges, is a 40% tax rate, or even a very high 60% tax rate by US standards, a real disincentive to earning more money?

For me, and for people like me, it would be. I work high-paying shit jobs precisely because they pay a lot. The amount of saving I'm able to do in these jobs is life-changing (i.e. FU money after 5-8 years). If most of that money went to taxes, there'd be little point in doing them and I might as well induldge in doing something more satisfying instead.

> If we have tax brackets, then yeah sure there could be an unlucky minority of people who just barely land in a higher bracket than someone just under the line, so they pay a higher percentage than someone else.

This statement makes me think you might be confused about tax brackets. This is a common misconception, so I'll explain how tax brackets work.

Tax brackets assign a percentage to tax up to a certain amount of income. Suppose you went over a bracket by $100, then only that $100 is going to taxed the highest amount. The entire income is not taxed the amount in the highest tax bracket. So, while the unlucky people are still taxed at a higher amount, it is for a very small amount of their income. Their after tax income will be still be more than somebody who earned less money and was just under a tax bracket.

> I wasn't a big fan of the tax cuts, even though I'll see the proceeds from them. Some think that the less you pay, the better, all the way to zero.

So I take it you’ll be paying extra on your federal taxes next year and earmarking the difference for the federal debt or other things you find worthwhile?

That line of questioning frequently appears in these arguments. I find it disingenuous because if I did pay extra towards my federal taxes, I still (after rounding) have inherited the same amount of future obligation and I should expect, as taxes are invariably raised in the future, that I would be expected to pay towards that future obligation as well.

Arguing that we should all collectively pay more does not require one to individually contribute at that higher rate, nor does arguing that we (including the proponent) should collectively pay more ring near as hollow as arguing that those other people should pay more.

The other stupidity of that line is what difference will it make it I paid more tax voluntarily? Obviously bugger all. But should the middle/upper society all pay more it gives the govt significantly more resources to better society. Its a willingness for personal sacrifice for the greater good, not personal sacrifice for no good.

Can these people ever see tax as a value proposition? Wasted tax dollar are bad. But if you pay 5% more and get universal healthcare and get a liveable social security safety net that seems OK to me.

Further this attitude that its 'taking money I earnt' need to understand they are driving on roads that were built by generations ahead of them. Using sewers that their grandfathers laid, often on tax dollars. Benefiting from the political freedoms people literally fought and died for. Etc. If they want to claim the money earn is theirs the should go to someplace completely unoccupied and carve out an existence. See how much success they create truly on their own back. Maybe then they can understand we are all standing on the shoulders of those that came before us and that opportunity/system needs to be paid for and ideally continued to be improved upon.

>Arguing that we should all collectively pay more does not require one to individually contribute at that higher rate

It’s about sticking to your principals — if you disagree with the tax cut, the last thing you should do is benefit from it. Give the government the money you would’ve paid had there not been a tax cut. Doing otherwise gives you no right to complain about it.

Yes, it gives, because oneself decision to give back US$ 2k in a year to the government is peanuts, you don't impact anything, disagreeing on tax cuts in a societal level means more money is on the pot to be divided in projects that benefit the society.

You can't stand your ground on every issue that demands that a large part of society support it to work, that's not how it works. A lot of principles are only helpful if a larger part of society shares and act on them, individually they are useless.

It does not at all follow that because someone thinks that top marginal tax rates should be raised (amounting to hundreds of billions or trillions of dollars), they will unilaterally send a few thousand extra dollars beyond their statutory bill to the IRS with the expectation that that would accomplish anything.

It's not about accomplishing anything. It's about the principle of it.

If someone thinks sending the gov't an extra $10,000 is money well spent, then they do it regardless if others do it.

Taxes do accomplish something real. They are paying for grandma's healthcare, Johnny's schooling and Jim's GI benefits. Everyone needs to contribute their share or the kids don't get educated, grandma dies and Jim defects. In principle, my individual contribution is not going to maintain a large national program. So if I'm interested in saving a large national program, my individual contribution isn't going to do it. I'll need to adjust the tax policy of an entire nation. This is why my position is more complex than my own personal contribution. Hopefully you'll appreciate this.

Yes, because obviously me paying an extra $10,000 is the same as everyone paying an extra $10,000. Do you think we just hate money?? Is that where you are coming from?

Yes, but if you're ok paying an extra $10,000, why not just do it now?

Well if you and the millions of people whining about the tax cut paid extra...

It’s about the principal of the matter. If you disagree with the tax cut, don’t benefit from it. Take a stand.

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