Quote:
Originally Posted by peter12
I never fancied myself as intelligent. What I was getting at is what is the incentive for moving into a higher bracket. Obviously millionaires weren't reduced to paupers, but they were disincentivized from making more money - ie. taking risks with their fortune which is actually good for the economy and workers, generally.
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Those rates specifically reference income, investments where one takes risks with their fortunes normally fall under different tax regimes.
At a certain income level, earning more starts to become more about status than the actual dollars you earn.
At the top end of the market if all individuals are being taxed in a similar fashion the the luxury goods market will adjust itself to those levels of income, a $5000 suit doesnt cost $4500 more to make than a $500 suit, it is just where the luxury goods market is able to exist an existing net income levels.
Currently the best argument that could be made against this model is international competition for where a person or companies choose to let their taxes land. Globalization and Heavaning have put governments in a slightly competitive situation against each other, vying these individuals to claim their assets and income in their jurisdiction. I think if, when and how this gets solved will go down as the key issue in 21st century economic philosophy.
One thing extremely high personal income tax rates at extremely high marginal income levels can do is encourage reinvestment in the corporation, or raising salaries of mid to upper management. Because the money can do allot more in those positions as the increase become less valuable to C level executives and board members. As stated above the problem becomes competition for these tax bases, it just isnt the reality we live in right now in our current snail race to the bottom.