Whatever. The premise still holds fine, we could drastically increase marginal tax rates at the top end and the world wouldn’t blow up.
And to the extent we used that money to make the social contract more stable via health care and education or similar, there would almost certainly be net gains to national efficiency and income.
Confiscatory high tax rates just result in politically connected groups getting tax breaks, lots of money spent in less productive ways to avoid the high rates and if those can't be done you get dead weight losses from economic activity that isn't done. There is a reason countries moved away from confiscatory high rates.
Taxes are one of the only ways to curb wealth inequality within a capitalist system. Any other ideas? The problem is that wealthy people can afford to set up multinational tax avoidance schemes to avoid actually paying the amount they should be paying.
One solution is to just jack up the rates. If 90% marginal rate on paper only actually results in 45% being collected, then that's still better than 39% marginal rate on paper vs. 15-20% truly collected.
Taxes and public spending are obviously not perfect, there are plenty of inefficiencies throughout. Corruption must be targeted rigorously, otherwise inequality will actually increase. But there needs to be a constant effort to reduce wealth centralization.
If you have really high taxes, the only way to get rich is to be born rich.
High estate taxes make a ton of sense from a social perspective. High income taxes, much less so.
That isn't what was done. The comparison is over time. The claim is often made that the rich paid far more of a share of the taxes until Reagan lowered the rates. The data shows otherwise.
>...Clearly the top earners are paying much more in tax from a clear dollar to dollar perspective. They own all the wealth.
That is a somewhat simplistic and misleading way of describing the income tax system. Income is not the same as wealth, etc. but also the US has a more progressive tax system than just about any of the OECD countries. The top 10% in the US make about 33% of the market income and pay 45% of the income taxes:
https://taxfoundation.org/news-obama-oecd-says-united-states...
>...One solution is to just jack up the rates. If 90% marginal rate on paper only actually results in 45% being collected, then that's still better than 39% marginal rate on paper vs. 15-20% truly collected.
There are reasons NO countries institute such policies for long. It isn't because high rates haven't been tried, it is because it ends up hurting the country. You need only look at France's experiment with a 75% marginal rate and a wealth tax in 2012 and was dropped in 2015.
>...French economist Eric Pichet in a recent academic paper has found evidence of capital flight as a consequence of the French wealth tax, namely, that it has cut French GDP growth by 0.2% per year.
https://www.forbes.com/sites/jonhartley/2015/02/02/frances-7...
>...But there needs to be a constant effort to reduce wealth centralization.
This probably isn't the only criteria that people should be concerned about. If the top 50 tech companies in the US had been started in Europe instead of the US, that would have measurably lowered the wealth inequality in the US but most people would say the US is better off being a tech leader.
Comparing France to the US in this situation is wrong. If people making more than $10 million a year or with a wealth of more than $50 million are going to leave the United States we have ways to handle this, namely the Expatriation Tax, which France doesn't have. You need to compare France to an equal situation like the US State of New Jersey applying a higher income tax and losing their state citizens to fellow states in the collective federal territory of the United States.
I wouldn’t necessarily expect many people giving up citizenship, but I would expect (as the article talks about) politically connected groups getting tax breaks. I would also expect lots of money spent in less productive ways to avoid the high rates and if people can’t avoid the tax, there will be dead weight losses from economic activity that isn't done.
>...You need to compare France to an equal situation like the US State of New Jersey applying a higher income tax and losing their state citizens to fellow states in the collective federal territory of the United States.
No state has ever tried such a bad policy, but if they did, I would imagine moving would be on the mind of everyone who might be affected by wealth taxes and 75% rates.
Why are you so biased? High rates of taxation is not bad policy. Bad policy is far more nuanced than that.
Most people would agree that raising the max tax rate from 8.97% to 10.75%, is not anything like raising the max tax rate from 45% to 75% - never mind that France also instituted a wealth tax.
>...Why are you so biased? High rates of taxation is not bad policy.
All I’ve done is give evidence that countries have learned that very high confiscatory tax rates are counterproductive. (Much as the original article about Hollywood tax avoidance discusses.) You haven’t said what you mean by “high rates of taxation” or give evidence why you think they are good - it isn’t clear why you are accusing anyone else of being biased.
As a start, do you actually have a link that can back that up?
No, the world would not blow up. But you'd generate basically zero revenue. People that make $10 million a year are mostly not making that in the form of cash compensation. And those that are have the leverage to demand different forms of compensation. Which they will immediately do. The person that person that makes that kind of money that also doesn't have the power to say "pay me in equity now, thanks" is extremely rare indeed.
https://www.investopedia.com/articles/active-trading/061615/...
In some cases yes, but often no.
The only potential tax avoidance I see is:
(1) avoided income tax by flexibility in timing of the exercise/sale
(2) potentially avoided capital gains tax if the value of the option grows before exercise/sale
In neither case do I see a way to get around income tax on options given as compensation for work.
Extraordinary claims require extraordinary evidence, which you’re not providing.
If you keep all else constant then raising the tax rate will raise revenue. Your narrative about how all else will not be held constant isn’t compelling.
Whatever mechanisms you describe for tax avoidance are only marginally different at 35% than 70%, making your hypothesis of zero obvious fiction.
Either they pay tax now at a certain rate or they don’t. Your premise that raising the rate won’t change the tax bill is based on your theory that whatever they’re paying now is just by their grace and free will?
The top marginal tax rate in Denmark is over 60%
I've been there, it's awesome, everything works super great, and the country consistently ranks as the happiest population on the planet. They also have a great economy.
Meanwhile I've lived in the US for almost five decades and watched as the billionaire class has lobbied successfully for lower taxes, offshoring, financialization of everything, and criminalization of debt, leading to vast swaths of the country condemned to permanent economic misery, increased xenophobia and political instability, declining standards of healthcare, and an out of control problem of education debt for the next generation.
So far none of the politicians in the US arguing for very high rates in the US are arguing that the bulk of the country should pay them.