Here's how a marginal tax rate works.
Sally CEO has a contract that calls for a $9 million salary. And a $1 million bonus should she hit certain performance targets. Let's say Sally hits those targets. And let's say the top marginal federal tax rate is 94% for any income above $9 million (for now, assume no deductions etc. which would change the numbers, but not the principle).
Sally would not pay 94% tax on $10 million.
But for her $1 million bonus, she would receive $60,000. And the other $940,000 goes to the government.
I get that many people believe no one should make that kind of money. Tax the rich, redistribute wealth etc. That's fine if it is your belief.
But, in my opinion, with a marginal bracket of 94%, the government is essentially making it illegal to make over x amount by taking almost all of it away. In my opinion, it is not the purpose of taxation to put a cap on what people should earn which is what absurdly high marginal tax rates do.
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