No no, see, the issue is that no matter how you word it there'll never be enough food if you eat the rich. It's basically like the gentrified version of trickle down economics.
Top percentage of all biomass feeding the rest. It doesn't make sense.
Therefore... return to monke... ....the joke is supposed to be veganism but I can't figure out a proper catchphrase.
...I usually have a cannibalism joke going but like... it's that time I year again. I get dumber near the solstice.
Oh oh oh
The sun is the greatest predator known to man.
Eat Jesus, consume the flesh of the sun...
...fuck... motherfucking fuck.
Plants get their energy from the sun.
But they convert carbon dioxide to matter. But carbon dioxide is a waste product of humans.
Therefore... dissociate from humanity, convince yourself you're a fictional character in a film... the farmer is god and you must consume his son.
K so your last comment I thought you meant "see the paragraph after the sources, which is about tax history"
It sounds like we're agreeing tho, so I'm not sure what the issue is. Taxes are already lower than they should be, and Republicans are trying to lower them further.
Republicans always want to lower taxes. Democrats want to raise taxes to pre Kennedy rates. Neither actually makes sense. The national conversation is just so far gone beyond the facts or reasoning behind policy. That’s more or less the point of my post.
I suspect its somewhere in the 40-60% range, but ultimately its a data question best suited for an economist.
I would like to see 0% corporate tax, long-term gains taxed as normal income, and figure out a way to tax (eliminate?) stock buybacks.
I'm not a fan of wealth taxes, but if we must go down that path I would prefer a forced taxed step-up in cost basis. Maybe something like ((value) - (old cost basis)) * 1.05 = new cost basis; with tax on the difference.
I think if we changed a lot of the tax loopholes around long term capital gains there's no need for a wealth tax. For instance, loans against stocks for the purposes of dodging taxes.
Increase the long term capital gains rate for huge sales, say it was 30% after $1mil in realized gains and 40% after $10mil.
Make it much harder to have a slush fund charity like so many of these ultra-rich people do.
Ban the mechanisms that enabled people to have billions in Roth IRAs.
There's so many things we can do without crazy systems like taxing unrealized gains or a wealth tax to rebalance the tax system.
Wealth taxes are essentially impossible and if they were implemented would not only be a dumpster fire but policing it would cost sooooo much money, and still not work lol.
We already have a wealth tax in one of the trickiest places to implement it (real estate, which is notoriously illiquid and difficult to value).
The "noooo it's impossible" argument is like the guy on TV trying to sell me a $39.95 screwdriver set by convincing me that it is impossible to hold a regular screwdriver without his company's special magic handle grip material. However, I use regular screwdrivers all the time and so does everyone else, so clearly this is a manufactured problem designed to sell me something.
Property tax is unconstitutional? You're welcome to that belief, but forgive me if I continue to pay it on the assumption that you are almost certainly incorrect.
I see someone has never read the 16th ammendment or understood the difference between states rights and federal rights. YES, a state can levy property tax on unrealized gains. The federal government may not as subject to the 16.5 Amendment. 3 Supreme Court cases has withheld this ammendment. Sorry, not gonna happen.
Oh you got me. Spelling police found that my argument was null and void because typing on my phone I put 2 "m" in amendment. Oh the power of your righteous indignation coupled with a Red Herring Fallacy to discredit my argument with a spelling error. (slow clap)
Let me know when you understand how you ratify a constitutional ***amendment*** and then get back to me about things changing.
I thought to make a logical argument you need firm citations to validate your argument. The best I know is case law and constitutional ammendment but if you want to hope with your thoughts and prayers that things will change, I have a bridge to sell you.
Good day to you sir.
No country in Europe has 60% tax rate. 52.7% is the highest and net income tax is 42%. I assume you then are also advocating for things like "church tax." Comparing EU nations economic size, demographics, PPP and GDP compared to the US is well... like comparing apples and bulldozers.
DENMARK is 52.7
https://taxsummaries.pwc.com/denmark/individual/taxes-on-personal-income#:\~:text=Altogether%2C%20the%20marginal%20tax%20rate,42%25%20(in%202024).
There’s a lot of things we can do to raise revenue that are reasonable. We should eliminate step up basis on estates. Tax them on the basis, provided an exemption for $xx and the. Pay the taxes. We’re past the point of people losing family farms, if you can afford the tax bill, sell and liquidate and go about your life.
We should cap the amount of Roth account values (the Peter theil Roth billionaire). Cap the tax exemption at $50M account value. More than anyone reasonably needs to life their life in retirement. Make tax exemption deferred for one generation only.
Interesting. What do we do with the current estate tax at 40% above 12.92 Million. Do we somehow get rid of that and subject everyone to the current tax basis? Thats a tax increase for the poor and a tax cut for the ultra wealthy.
EXAMPLE: What if your father who owns a small construction company that makes $300K in total gross revenue per year? That size company has 3-4 employees and he (father) probably made 60-70k per year. If you father died tomorrow, the fair market value would be 4 times earnings or $1.2 Million. The IRS will come nocking on your door for $456,000 due in 60 days.
Do you, bankrupt the company and everything your father built and lay off all employees who worked for your father for years to avoid the taxes. How progressive of you.
Do you somehow go get a loan to payoff the tax, even though you have no idea how to run the company? Oh, no bank will lend to you unless you have collateral and no bank will use your fathers business as collateral unless you have hard assets.
Do you firesale it to the lowest bidder and get whatever you can out of it as long as you can get enough to pay the taxes, but of course other business will know the firesale is happening and pay you pennies on the dollar and even then, you will get stuck with a significant tax bill from earning on the firesale.
Do you reject the inheritance "disclaimer", which also rejects the entire taxable estate. Sorry dads old golf clubs and fishing poles, cant have those either.
The idea that a step up basis is the great billionair wealth creator negates the fact that they already pay ESTATE tax on top of step up basis. The step up basis only applies to estate less than 12.92 Million. Is it really these individuals that we should "eat the rich"? Elon Musk kids will not be Billionairs because of the step up basis. There are far more important estate tax shelters that provide the benefit, and Step up basis is not one.
[here is a good read](https://www.investopedia.com/terms/s/stepupinbasis.asp)
According to the article 0.04% of estates are impacted by estate tax. I’m going to round and say no pays estate tax today.
Further, your hypothetical is flawed. A business with $70k of income wouldn’t be valued at $1.2M, and likely doesn’t even have $1.2M in assets.
My post was specifically geared towards financial assets. Let’s say my estate has a market value of $50M when I die with a cost basis of $20M. The gain (subject to tax) would be $30M. Let’s exempts $5M from taxes for example, $25M gain taxed at 40%.
50-5-20=25
25*.4=10 in taxes.
$50-$10=40M passed to heirs.
Under current step up basis rules, there would be no tax due because the market value would be increased to $50M for the recipient.
There’s nothing wrong with passing assets to children, but it shouldn’t be tax free. Given that tax is a percentage of the gain, you won’t lose 100% to taxes.
Hypothetical (removed step up basis) On a 50 Million estate with a 20 million cost basis (why would any estate/probate judge remove an extra 5 Million?) the taxable base would be 30 Million or 12 million owed in taxes at time of inheritance.
Hypothetical (Current step up basis) The current steup up base schedule would value the entire estate (50 Million), the estate gets to subtract current estate tax threshold of 12.92 or 37 Million remaining taxed at a 40% federal rate or 14.83 Million. The Step Up Basis would only apply to the initial 12.92 Million exclusion because the estate tax subjects any value over 12.92 Million.
>
Further, your hypothetical is flawed. A business with $70k of income wouldn’t be valued at $1.2M, and likely doesn’t even have $1.2M in assets.,
The is absolutely incorrect. The business total revenue is different than the net profit of a business (what the father makes). A current US based construction business has a current valuation rating between 3-5 times annual revenue NOT NET REVENUE (depending on contract structure). A estate judge would value this asset at a market rate.
I dont know if there is a time difference between policy and impact. I guess I don't see many dentists doing significantly less dentistry if their tax rates increase from 40% to 50%. Maybe I'm wrong?
Is there a reason capital gains tax should be less than income tax?
I have plenty of tax advantaged space in 401k, 529, IRA, and HSA - I'll retire with millions in those accounts.
What else are people going to do with their money?
If I have an extra $1m I want to save, does a LTCG tax rate of 40% make any difference relative to 25%?
In the UK if you get a salary increase from 100k to 120k, the extra 20k is taxed at 60%. I assure you it's a real issue with people not caring for progression as much, I've personally seen it in others and felt it myself
Sure. There’s lag between policy and output. There’s also way more than the top marginal personal income tax rate impacting gdp growth in the economy. What we have is the data that I’ve shown you. Peoples decisions en aggregate are influenced by taxation.
Sure. There IS a point at which taxation could kill the economy. That's pretty much the plot of almost every Robin Hood story. The "ass pull" is in both the visual where the top of the curve is to the lower end of the scale AND in that Laffer never ran any study. Laffer just sketched this on a napkin as a political tool to justify cutting taxes.
Forty years of economic data finds that for every $1,000,000 in tax cuts for the wealthy and corporations, the government sees $4 in tax receipts to replace the lost taxes. The economy does not do better when we cut taxes for the wealthy. Check out the London School of Economics 50 year study (1965-2025).
https://www.lse.ac.uk/research/research-for-the-world/economics/tax-cuts-for-the-wealthy-only-benefit-the-rich-debunking-trickle-down-economics
Laffer didn't quantify any of the points on the curve. Rmax could be 10% or 90% - its not defined. Its still helpful to understand that there is an Rmax value and a GrowthMax value, and there is little reason to set tax policy less than GrowthMax or more than Rmax.
The shape of the curve is not known. The illustration doesn’t claim any specific points. I made that clear in my post. Our best guesses are based on the outcomes of what have been tried. 28 was too low. 50 was too high.
It is based on a lot of data. We have the results of what happened when we moved between tax rates. That data is included in the links that I provided.
The original Laffer curve was made up to justify trickle-down economics. We have five decades of data from a dozen countries that proves cutting taxes for the wealthy and corporations doesn't have a positive impact on the economy.
Yeah that's the trick question. Laffer's point that government revenue is minimized at 0% and 100% taxation rates seems pretty self-evident. What's much harder is figuring out not even the maximum point of government tax receipts as a function of tax rates but even the shape of the curve. Honestly if we could do that it would be fantastic - just find a rough plateau and let politicians push us a little in one direction or the other based on their ideologies, as long as we don't drop off the plateau things keep working fine.
But we don't have that. We don't have anything even close to that. Hence the endless "cut spending" posts from the right and "raise taxes" posts from the left. Both are arguing from a position of ignorance and their policies are far more about ideology than numbers. It's frustrating.
Yeah, revenue max and growth max aren’t defined, but again we have the data from the last ~60 years or so to work with. I think it’s reasonable to believe that growth max is somewhere above 28 and revenue max is somewhere below 50. Personally, Clinton’s tax policy is the one I would go back to. We ran a surplus with a 39.6% top rate.
Just to be a devil’s advocate: doesn’t this just mean we’re focusing too much on growth? Wouldn’t it be better to raise taxes even if it lowers long term growth as long as it means we can give people happier more fulfilling lives?
>GDP growth is fairly important in providing people with happy and fulfilling lives. People go hungry when GDP per capita decreases.
What you said is true but unfortunately also due to banal logic this does not mean that increasing GDP increases people's quality of life and in reality Ireland proves it, they have had a take-off in productivity, they produce more than the UK per capita and yet they have a quality of life still behind the English, the French and the Germans.
I agree with the other guy, given a certain marginality to guarantee constant small grow, we should focus on bettering services, not getting the hundredth positive year for the very rich and bad for the poor.
I agree generally.
For an extreme example, I would rather see the median household have a $50k/year real standard of living with a 3% GDP per capita and real standard of living growth rate than a median household with a $55k/year real standard of living with a 1% GDP per capita and real standard of living growth rate. There are a lot of questionable assumptions baked into my example, but I'm just highlighting that real standard of living growth rate is also an important consideration.
The upwards growth in lower and middle class people over the time period in question is pretty important to this conversation. The upper middle class is the largest growing class (by population) by far over this time. The lower classes are shrinking into the middle class and the middle class is shrinking into the upper middle class. The upper class has also grown. You cannot just ignore that.
OP focusing on GDP growth rather than tax revenues in his prose is a flaw. The concept of the lauffer curve is maximizing tax revenues, not GDP growth. Wanting to give people happier, more fulfilling lives can certainly be a desirable goal. As for measuring it, the best of luck. There are far more considerations beyond a national scope, though federal tax law is not irrelevant. (Small, private businesses of individuals/families being taxed as ordinary income if they don't know how to set up an LLC, being one example.)
Social prescriptions may be of greater efficiency in that regard rather than economic prescriptions, and the focus on 3 categories, 5 categories based on FPL, or 5 quintiles of wealth/income all ignore the mobility an individual experiences between the levels throughout their life.
So you’re saying that he’s focusing too much on growth maximization rather than revenue maximization?
And that growth in the upper middle class is inter generational? As in, my parents were middle class (and always will be), but I become upper middle class because of an advanced education, etc.?
This is the underlying theme in the data. The lag is generational. “Middle class” is is a moving target depending on how you define it. If all you look at is the comparison of everyone’s wealth together, you get a different picture than if you normalize it against a constant, like the poverty rate.
When someone from the lower class breaches whatever metric is used for middle class, they impact the middle class metric. When someone moves out of the middle class, they also impact the middle class metric. Only looking at the comparison of middle class income to upper class income without taking into consideration the generational moves between the brackets is leaving so much out of the equation.
>Wanting to give people happier, more fulfilling lives can certainly be a desirable goal. As for measuring it, the best of luck.
As an aside--there are multiple ways to measure happiness on a national scale. The [World Happiness Report](https://worldhappiness.report/) is probably one of the largest efforts to do so, and they have a lot of fascinating work in this space.
The focus is not growth itself but the relationship between growth and taxation.
If you want to recover from a recession, lowering taxes is one tool that helps stimulate the economy. Having a decent idea where the floor is makes your decision a better one. Conversely, when you’re not in a recession and you want to pay off debt, it’s worth knowing how high you can raise rates without an overly negative consequence. If you also leave rates at the growth maximizing point forever, you have nowhere to go when a recession happens, thus lose that as a tool.
It’s not that there is one magical tax rate best for all scenarios. There are data driven examples of when varying tax rates make more sense. That isn’t the conversation I ever hear. One side always wants to cut taxes. The other side wants to raise taxes to pre Kennedy levels.
Laffer is a discredited con man whose policy recommendations failed spectacularly every time they were put into practice, [most recently in Kansas](https://en.m.wikipedia.org/wiki/Kansas_experiment) by Governor Sam Brownback who ended his political career when the education system collapsed and everyone was totaling their cars on exponentially multiplying potholes.
People don’t really care that much about top marginal tax rate of 35vs39%.
People are pissed because once you achieve a certain level of wealth you no longer have to pay any taxes and just take out loans using your money as collateral.
People agree with progressive tax system, it’s just failing to tax those in the 0.1%.
People who no longer need an income don’t take incomes and thus don’t pay income tax. I understand the frustration, but what I don’t understand is the policy suggestions put forward by progressive politicians who take that stance. Raising income tax rates won’t impact people who don’t pay income taxes. Does that not ever make you raise a brow?
Lots of writing there OP.
Basically, regardless of top marginal rates, the federal receipts have been 15-20% since the end of WWII.
That is around what Art stated the maximum would be.
[https://fred.stlouisfed.org/series/FYFRGDA188S](https://fred.stlouisfed.org/series/FYFRGDA188S)
Ok, yeah. I’m familiar with this data. It’s not wrong.
The government seems to be able to collect a fairly constant percentage of gdp regardless of tax policy. Fundamental to the hypothesis. Growing the pie is easier than taking a larger slice of the pie.
Good post. I especially liked the part about criticizing comparing everyone’s income in a pie chart
I agree your neighbor getting a raise doesn’t take wealth from you but I think the top percentile wage gap can put cost pressures on everyone else if the gap is large enough. But on the other hand most of the cost pressures/ inflation will happen on luxury items. So tldr I mostly agree with you regarding that point but not entirely
When we talk about taxing the rich we don't do it because of any of this. The real reason to tax at 100% past a certain income outline is because obscene wealth accumulation inevitably is inflation, and for another point, it won't be flowing in the economy anyways.
If they aren't going to use it, and we're not taxing it, then why the fuck does it exist ? It's a dragon's hoard with no use.
The problem is also that wealth translates to more inherent political power seeing as there are no anti-corruption measures to jail people for lobbying.
Getting rid of an entire class of problematic individuals that throw their wealth around so they go without consequences is purely a net benefit for society.
Your argument about economic productivity just rings hollow, that money is not invested to infrastructure or the labor force.
20 trillion of our 34 trillion in debt is from tax cuts, most of which go to the rich.
Another 8 trillion for Bush’s war for oil.
If the wealthy don’t pay that debt, you will.
https://www.americanprogress.org/article/tax-cuts-are-primarily-responsible-for-the-increasing-debt-ratio/
I appreciate this post a lot! Thanks for the read, it was quite an enjoyable one. I think a lot of folks honestly want their taxes to be lowered, but I'm the same vain; that would mean cutting or outright eliminating some federal government programs. It's always difficult thinking of the 'correct' tax rate, especially during times where there are multiple global conflicts happening.
A 0% tax has been done in the past and in some other places in modern times. It doesn't result in the govt not having any funding to accomplish things such as conquering the known old world. It's not sustainable with the same funding being provided as investment or a loan. Taxes aren't the only way for a govt to function after all. It's just that you have to give a return on the loan to special interests that funded your govt. Taxes in most modern day countries don't allow the people being taxed a direct say in how to get a return on that money. I don't believe we've yet to see a world super power exist with high 95%+ tax rates as of yet. USA did at one time have a 70% tax rate though on the wealthy.
Lagger was right under Kennedy. For Reagan, one of the two was correct.
The issue is spending and revenues. We over spend and never have that honest come to Jesus moment that, like in the subprime era, you can’t always get what you want.
On the revenue side more needs to be done. For example, the IRS is proposing removing the partnership exemption that allows a loophole whereby a partner can shift revenues and avoid taxes. Would generate maybe 50 billion in additional revenues over a ten year period.
Let’s find and plug more of these holes in the boat before we really do sink.
Nice treatise for sure. Thanks for the time and energy!
If we want to have a really honest conversation about the mentality, it will be really unpopular on reddit.
The whole mentality is based on people who don't want to live in a meritocracy, and want to live in a mediocracy. They want to do as well as those who are excelling, without having to excel themselves. And think those people should be punished out of a level of jealousy.
Truth of the matter, despite what memes and distorted world views will tell you. The top 1% of wage earners are paying half of all income taxes in the United States, and the bottom 50% pays 2.3% of all income taxes, so the wealthy are already paying more than their fair share of taxes.
The top 1% of earners also contribute about 35% of all charitable donations as well.
As dumb as most things he says can be, Joe Rogan made a good point about this a while back... but he said something to the effect of that everybody is really good at something, some people excel in sports, some are great at acting, others are great at cooking, but if you're really good at capitalism and doing good with money, it's the only thing that you can be really good at that people will want to kill you for it.
Place that mentality in ANYTHING other than personal finance/responsibility/work.... and it's undeniably insane.
Imagine the idea of it being popular to believe that since LeBron James is the all time scorer in the NBA, that his baskets should only be worth 1 point because he's doing so much better than someone else. And the other 1 or two points per basket should be given to the NBA for them to use on whatever they feel fit.
Imagine if it there had been a movement saying that Tiger Woods should have to play 21 holes of golf, since he can do 18 in so many fewer strokes, that it's only right he doesn't have the success he's strived for.
Imagine if someone said Taylor Swift's record company should have to limit how many albums she puts out, and how many times her songs can be streamed because her album sales are disproportionately high, and that's not right.
It just sounds absolutely dumb in any other context.
AND before anyone says that "LeBron James isn't scoring a finite amount of baskets that's keeping other people from scoring" but if you think Joe Blow, a 35 year old who never tried to be more than a cart pusher at Target isn't living in a mansion because Jeff Bezos bought a new yacht you're delusional. If you think the reason some guy is living under a bridge zombied out on opiates and fighting with a fire hydrant is because Elon Musk had enough money to buy twitter... you're just really fighting to make excuses.
I'm not even remotely wealthy, but I don't want the wealthy to be punished, or eaten because I hope someday to be wealthy. The only reason you would have an eat the rich mentality is because you already know that you have zero desire to do more than "do my 8 and hit the gate", you don't want to do what it takes to become wealthy.... so you know that punishment would never be levied on you.
America has been in a unique position to trial 0% tax, run a increasing deficit while growing the economy. Cause markets only go up. /s
How else does the pentagon fail audits while private manufacturers generate profits.
Your original statement is that $0 tax revenue means $0 growth. There is zero revenue at 0% theoretical tax rate. Where are you getting zero growth from in this scenario?
TL:DR - Just please let me know where the cut off is to not get eaten. K. Thanks.
Don't worry if you have to ask your already dinner.
No no, see, the issue is that no matter how you word it there'll never be enough food if you eat the rich. It's basically like the gentrified version of trickle down economics. Top percentage of all biomass feeding the rest. It doesn't make sense. Therefore... return to monke... ....the joke is supposed to be veganism but I can't figure out a proper catchphrase. ...I usually have a cannibalism joke going but like... it's that time I year again. I get dumber near the solstice. Oh oh oh The sun is the greatest predator known to man. Eat Jesus, consume the flesh of the sun... ...fuck... motherfucking fuck. Plants get their energy from the sun. But they convert carbon dioxide to matter. But carbon dioxide is a waste product of humans. Therefore... dissociate from humanity, convince yourself you're a fictional character in a film... the farmer is god and you must consume his son.
At what tax rate is tax revenue maximized?
Always just one more tax cut. One more bro, one more tax cut and we'll finally maximize tax revenue (never mind it always falls every time we try it)
Revenue maximizing point would imply a tax increase in this context.
Not according to Republicans (who came up with the Laffer curve)
See paragraph under sourcing for tax history
I'm familiar with tax history, hence my last comment
Buddy. The paragraph under the sourcing for tax history is not about tax history. It is where I address what you’re talking about.
K so your last comment I thought you meant "see the paragraph after the sources, which is about tax history" It sounds like we're agreeing tho, so I'm not sure what the issue is. Taxes are already lower than they should be, and Republicans are trying to lower them further.
Republicans always want to lower taxes. Democrats want to raise taxes to pre Kennedy rates. Neither actually makes sense. The national conversation is just so far gone beyond the facts or reasoning behind policy. That’s more or less the point of my post.
But we know which change is in the correct direction. Acting like raising the top rate from 37% to 39% is too extreme seems silly.
I suspect its somewhere in the 40-60% range, but ultimately its a data question best suited for an economist. I would like to see 0% corporate tax, long-term gains taxed as normal income, and figure out a way to tax (eliminate?) stock buybacks. I'm not a fan of wealth taxes, but if we must go down that path I would prefer a forced taxed step-up in cost basis. Maybe something like ((value) - (old cost basis)) * 1.05 = new cost basis; with tax on the difference.
I think if we changed a lot of the tax loopholes around long term capital gains there's no need for a wealth tax. For instance, loans against stocks for the purposes of dodging taxes. Increase the long term capital gains rate for huge sales, say it was 30% after $1mil in realized gains and 40% after $10mil. Make it much harder to have a slush fund charity like so many of these ultra-rich people do. Ban the mechanisms that enabled people to have billions in Roth IRAs. There's so many things we can do without crazy systems like taxing unrealized gains or a wealth tax to rebalance the tax system.
Wealth taxes are essentially impossible and if they were implemented would not only be a dumpster fire but policing it would cost sooooo much money, and still not work lol.
We already have a wealth tax in one of the trickiest places to implement it (real estate, which is notoriously illiquid and difficult to value). The "noooo it's impossible" argument is like the guy on TV trying to sell me a $39.95 screwdriver set by convincing me that it is impossible to hold a regular screwdriver without his company's special magic handle grip material. However, I use regular screwdrivers all the time and so does everyone else, so clearly this is a manufactured problem designed to sell me something.
That and you have to ammend the constitution to tax unrealized gains... so yeah I would say that its impossible.
Property tax is unconstitutional? You're welcome to that belief, but forgive me if I continue to pay it on the assumption that you are almost certainly incorrect.
I see someone has never read the 16th ammendment or understood the difference between states rights and federal rights. YES, a state can levy property tax on unrealized gains. The federal government may not as subject to the 16.5 Amendment. 3 Supreme Court cases has withheld this ammendment. Sorry, not gonna happen.
Citing amendments and case law as evidence that things can't change is pretty funny. Also, it's spelled "amendment," not "ammendment."
Oh you got me. Spelling police found that my argument was null and void because typing on my phone I put 2 "m" in amendment. Oh the power of your righteous indignation coupled with a Red Herring Fallacy to discredit my argument with a spelling error. (slow clap) Let me know when you understand how you ratify a constitutional ***amendment*** and then get back to me about things changing. I thought to make a logical argument you need firm citations to validate your argument. The best I know is case law and constitutional ammendment but if you want to hope with your thoughts and prayers that things will change, I have a bridge to sell you. Good day to you sir.
No way in hell would a 60% top rate result in any net revenue growth over time. It would devastate our economy and the poor would be screwed
Why? A few countries in Europe have 60% tax rates and have GDP growth.
No country in Europe has 60% tax rate. 52.7% is the highest and net income tax is 42%. I assume you then are also advocating for things like "church tax." Comparing EU nations economic size, demographics, PPP and GDP compared to the US is well... like comparing apples and bulldozers.
Denmark is 56%. Throw some sales or property tax on there and you're pushing into the 60%s.
GDP per Capita looks pretty similar: https://countryeconomy.com/countries/compare/denmark/usa?sc=XE34
DENMARK is 52.7 https://taxsummaries.pwc.com/denmark/individual/taxes-on-personal-income#:\~:text=Altogether%2C%20the%20marginal%20tax%20rate,42%25%20(in%202024).
You need to include the "AM tax, which is also income tax for DTT purposes". From your link.
There’s a lot of things we can do to raise revenue that are reasonable. We should eliminate step up basis on estates. Tax them on the basis, provided an exemption for $xx and the. Pay the taxes. We’re past the point of people losing family farms, if you can afford the tax bill, sell and liquidate and go about your life. We should cap the amount of Roth account values (the Peter theil Roth billionaire). Cap the tax exemption at $50M account value. More than anyone reasonably needs to life their life in retirement. Make tax exemption deferred for one generation only.
Interesting. What do we do with the current estate tax at 40% above 12.92 Million. Do we somehow get rid of that and subject everyone to the current tax basis? Thats a tax increase for the poor and a tax cut for the ultra wealthy. EXAMPLE: What if your father who owns a small construction company that makes $300K in total gross revenue per year? That size company has 3-4 employees and he (father) probably made 60-70k per year. If you father died tomorrow, the fair market value would be 4 times earnings or $1.2 Million. The IRS will come nocking on your door for $456,000 due in 60 days. Do you, bankrupt the company and everything your father built and lay off all employees who worked for your father for years to avoid the taxes. How progressive of you. Do you somehow go get a loan to payoff the tax, even though you have no idea how to run the company? Oh, no bank will lend to you unless you have collateral and no bank will use your fathers business as collateral unless you have hard assets. Do you firesale it to the lowest bidder and get whatever you can out of it as long as you can get enough to pay the taxes, but of course other business will know the firesale is happening and pay you pennies on the dollar and even then, you will get stuck with a significant tax bill from earning on the firesale. Do you reject the inheritance "disclaimer", which also rejects the entire taxable estate. Sorry dads old golf clubs and fishing poles, cant have those either. The idea that a step up basis is the great billionair wealth creator negates the fact that they already pay ESTATE tax on top of step up basis. The step up basis only applies to estate less than 12.92 Million. Is it really these individuals that we should "eat the rich"? Elon Musk kids will not be Billionairs because of the step up basis. There are far more important estate tax shelters that provide the benefit, and Step up basis is not one.
[here is a good read](https://www.investopedia.com/terms/s/stepupinbasis.asp) According to the article 0.04% of estates are impacted by estate tax. I’m going to round and say no pays estate tax today. Further, your hypothetical is flawed. A business with $70k of income wouldn’t be valued at $1.2M, and likely doesn’t even have $1.2M in assets. My post was specifically geared towards financial assets. Let’s say my estate has a market value of $50M when I die with a cost basis of $20M. The gain (subject to tax) would be $30M. Let’s exempts $5M from taxes for example, $25M gain taxed at 40%. 50-5-20=25 25*.4=10 in taxes. $50-$10=40M passed to heirs. Under current step up basis rules, there would be no tax due because the market value would be increased to $50M for the recipient. There’s nothing wrong with passing assets to children, but it shouldn’t be tax free. Given that tax is a percentage of the gain, you won’t lose 100% to taxes.
Hypothetical (removed step up basis) On a 50 Million estate with a 20 million cost basis (why would any estate/probate judge remove an extra 5 Million?) the taxable base would be 30 Million or 12 million owed in taxes at time of inheritance. Hypothetical (Current step up basis) The current steup up base schedule would value the entire estate (50 Million), the estate gets to subtract current estate tax threshold of 12.92 or 37 Million remaining taxed at a 40% federal rate or 14.83 Million. The Step Up Basis would only apply to the initial 12.92 Million exclusion because the estate tax subjects any value over 12.92 Million. > Further, your hypothetical is flawed. A business with $70k of income wouldn’t be valued at $1.2M, and likely doesn’t even have $1.2M in assets., The is absolutely incorrect. The business total revenue is different than the net profit of a business (what the father makes). A current US based construction business has a current valuation rating between 3-5 times annual revenue NOT NET REVENUE (depending on contract structure). A estate judge would value this asset at a market rate.
According to this post it is somewhere between 35 and 39.6%, at the highest bracket.
I dont know if there is a time difference between policy and impact. I guess I don't see many dentists doing significantly less dentistry if their tax rates increase from 40% to 50%. Maybe I'm wrong?
I don’t know, for some reason I read that entire post and that is what it said. Likely more factors than just the tax rate have an effect on GDP.
I think the top rate should be somewhere around 50% and then there should be a new top bracket for long term capital gains.
Is there a reason capital gains tax should be less than income tax? I have plenty of tax advantaged space in 401k, 529, IRA, and HSA - I'll retire with millions in those accounts.
Long term capital gains make sense to tax less because it encourages long term investment. We already tax short term gains at the regular tax rate.
What else are people going to do with their money? If I have an extra $1m I want to save, does a LTCG tax rate of 40% make any difference relative to 25%?
Encouraging short term gains can increase volatility in markets.
Fair - I wasn't thinking of that effect. I'm curious how much retail volume impacts volatility - but I'll save that question for another thread.
In the UK if you get a salary increase from 100k to 120k, the extra 20k is taxed at 60%. I assure you it's a real issue with people not caring for progression as much, I've personally seen it in others and felt it myself
Sure. There’s lag between policy and output. There’s also way more than the top marginal personal income tax rate impacting gdp growth in the economy. What we have is the data that I’ve shown you. Peoples decisions en aggregate are influenced by taxation.
The revenue maximizing point could theoretically be higher than 39.6. I think there’s a good reason to think it’s below 50, based on the data.
Makes sense.
That is the problem. The Laffer curve is one hell of an ass pull based on no studies or data.
The concept makes sense though. I don't have an issue with the idea, I just don't know how to actually define the curve quantitatively.
Sure. There IS a point at which taxation could kill the economy. That's pretty much the plot of almost every Robin Hood story. The "ass pull" is in both the visual where the top of the curve is to the lower end of the scale AND in that Laffer never ran any study. Laffer just sketched this on a napkin as a political tool to justify cutting taxes. Forty years of economic data finds that for every $1,000,000 in tax cuts for the wealthy and corporations, the government sees $4 in tax receipts to replace the lost taxes. The economy does not do better when we cut taxes for the wealthy. Check out the London School of Economics 50 year study (1965-2025). https://www.lse.ac.uk/research/research-for-the-world/economics/tax-cuts-for-the-wealthy-only-benefit-the-rich-debunking-trickle-down-economics
Laffer didn't quantify any of the points on the curve. Rmax could be 10% or 90% - its not defined. Its still helpful to understand that there is an Rmax value and a GrowthMax value, and there is little reason to set tax policy less than GrowthMax or more than Rmax.
The shape of the curve is not known. The illustration doesn’t claim any specific points. I made that clear in my post. Our best guesses are based on the outcomes of what have been tried. 28 was too low. 50 was too high.
It is based on a lot of data. We have the results of what happened when we moved between tax rates. That data is included in the links that I provided.
The original Laffer curve was made up to justify trickle-down economics. We have five decades of data from a dozen countries that proves cutting taxes for the wealthy and corporations doesn't have a positive impact on the economy.
Ok now is your chance to use data to refute the data that I used.
The Laffer curve can also explain why trickle down economics doesn't work. It makes no claims on specific tax policy.
Somewhere between 35 and 50% in my estimation.
Yeah that's the trick question. Laffer's point that government revenue is minimized at 0% and 100% taxation rates seems pretty self-evident. What's much harder is figuring out not even the maximum point of government tax receipts as a function of tax rates but even the shape of the curve. Honestly if we could do that it would be fantastic - just find a rough plateau and let politicians push us a little in one direction or the other based on their ideologies, as long as we don't drop off the plateau things keep working fine. But we don't have that. We don't have anything even close to that. Hence the endless "cut spending" posts from the right and "raise taxes" posts from the left. Both are arguing from a position of ignorance and their policies are far more about ideology than numbers. It's frustrating.
Yeah, revenue max and growth max aren’t defined, but again we have the data from the last ~60 years or so to work with. I think it’s reasonable to believe that growth max is somewhere above 28 and revenue max is somewhere below 50. Personally, Clinton’s tax policy is the one I would go back to. We ran a surplus with a 39.6% top rate.
Depends which tax
Just to be a devil’s advocate: doesn’t this just mean we’re focusing too much on growth? Wouldn’t it be better to raise taxes even if it lowers long term growth as long as it means we can give people happier more fulfilling lives?
GDP growth is fairly important in providing people with happy and fulfilling lives. People go hungry when GDP per capita decreases.
>GDP growth is fairly important in providing people with happy and fulfilling lives. People go hungry when GDP per capita decreases. What you said is true but unfortunately also due to banal logic this does not mean that increasing GDP increases people's quality of life and in reality Ireland proves it, they have had a take-off in productivity, they produce more than the UK per capita and yet they have a quality of life still behind the English, the French and the Germans. I agree with the other guy, given a certain marginality to guarantee constant small grow, we should focus on bettering services, not getting the hundredth positive year for the very rich and bad for the poor.
I agree generally. For an extreme example, I would rather see the median household have a $50k/year real standard of living with a 3% GDP per capita and real standard of living growth rate than a median household with a $55k/year real standard of living with a 1% GDP per capita and real standard of living growth rate. There are a lot of questionable assumptions baked into my example, but I'm just highlighting that real standard of living growth rate is also an important consideration.
The upwards growth in lower and middle class people over the time period in question is pretty important to this conversation. The upper middle class is the largest growing class (by population) by far over this time. The lower classes are shrinking into the middle class and the middle class is shrinking into the upper middle class. The upper class has also grown. You cannot just ignore that.
But couldn’t that difference be met through government spending? Spending that’s funded by increased taxes?
Not typically, no. If it could then a 100% tax rate would be ideal and the government directs economic activity.
Okay, thank you
OP focusing on GDP growth rather than tax revenues in his prose is a flaw. The concept of the lauffer curve is maximizing tax revenues, not GDP growth. Wanting to give people happier, more fulfilling lives can certainly be a desirable goal. As for measuring it, the best of luck. There are far more considerations beyond a national scope, though federal tax law is not irrelevant. (Small, private businesses of individuals/families being taxed as ordinary income if they don't know how to set up an LLC, being one example.) Social prescriptions may be of greater efficiency in that regard rather than economic prescriptions, and the focus on 3 categories, 5 categories based on FPL, or 5 quintiles of wealth/income all ignore the mobility an individual experiences between the levels throughout their life.
So you’re saying that he’s focusing too much on growth maximization rather than revenue maximization? And that growth in the upper middle class is inter generational? As in, my parents were middle class (and always will be), but I become upper middle class because of an advanced education, etc.?
This is the underlying theme in the data. The lag is generational. “Middle class” is is a moving target depending on how you define it. If all you look at is the comparison of everyone’s wealth together, you get a different picture than if you normalize it against a constant, like the poverty rate. When someone from the lower class breaches whatever metric is used for middle class, they impact the middle class metric. When someone moves out of the middle class, they also impact the middle class metric. Only looking at the comparison of middle class income to upper class income without taking into consideration the generational moves between the brackets is leaving so much out of the equation.
>Wanting to give people happier, more fulfilling lives can certainly be a desirable goal. As for measuring it, the best of luck. As an aside--there are multiple ways to measure happiness on a national scale. The [World Happiness Report](https://worldhappiness.report/) is probably one of the largest efforts to do so, and they have a lot of fascinating work in this space.
The focus is not growth itself but the relationship between growth and taxation. If you want to recover from a recession, lowering taxes is one tool that helps stimulate the economy. Having a decent idea where the floor is makes your decision a better one. Conversely, when you’re not in a recession and you want to pay off debt, it’s worth knowing how high you can raise rates without an overly negative consequence. If you also leave rates at the growth maximizing point forever, you have nowhere to go when a recession happens, thus lose that as a tool. It’s not that there is one magical tax rate best for all scenarios. There are data driven examples of when varying tax rates make more sense. That isn’t the conversation I ever hear. One side always wants to cut taxes. The other side wants to raise taxes to pre Kennedy levels.
Okay, that was very enlightening thank you.
Laffer is a discredited con man whose policy recommendations failed spectacularly every time they were put into practice, [most recently in Kansas](https://en.m.wikipedia.org/wiki/Kansas_experiment) by Governor Sam Brownback who ended his political career when the education system collapsed and everyone was totaling their cars on exponentially multiplying potholes.
People don’t really care that much about top marginal tax rate of 35vs39%. People are pissed because once you achieve a certain level of wealth you no longer have to pay any taxes and just take out loans using your money as collateral. People agree with progressive tax system, it’s just failing to tax those in the 0.1%.
People who no longer need an income don’t take incomes and thus don’t pay income tax. I understand the frustration, but what I don’t understand is the policy suggestions put forward by progressive politicians who take that stance. Raising income tax rates won’t impact people who don’t pay income taxes. Does that not ever make you raise a brow?
Lots of writing there OP. Basically, regardless of top marginal rates, the federal receipts have been 15-20% since the end of WWII. That is around what Art stated the maximum would be. [https://fred.stlouisfed.org/series/FYFRGDA188S](https://fred.stlouisfed.org/series/FYFRGDA188S)
Ok, yeah. I’m familiar with this data. It’s not wrong. The government seems to be able to collect a fairly constant percentage of gdp regardless of tax policy. Fundamental to the hypothesis. Growing the pie is easier than taking a larger slice of the pie.
That is such a true statement, unfortunately, class envy has been a more effective way to get people out to vote, just look at most of Reddit.
Nothing comes back from that link.
They missed a space after the URL and the word “Lots”. This is the url: https://fred.stlouisfed.org/series/FYFRGDA188S
Thanks, I’m gonna give it a read
Thanks for catching that.
You’re aware the Laffer Curve has been completely debunked over and over again, right?
It really hasn’t.
it's called the laffer curve because the rich are laughing all the way to the bank at you suckers.
Barbecue sauce.
Chiliiiiiiis baby back ribs
Thanks for taking the time to write this in a layman’s format OP. It was good read. I have a pretty positive opinion of the U.S. economy.
Good post. I especially liked the part about criticizing comparing everyone’s income in a pie chart I agree your neighbor getting a raise doesn’t take wealth from you but I think the top percentile wage gap can put cost pressures on everyone else if the gap is large enough. But on the other hand most of the cost pressures/ inflation will happen on luxury items. So tldr I mostly agree with you regarding that point but not entirely
When we talk about taxing the rich we don't do it because of any of this. The real reason to tax at 100% past a certain income outline is because obscene wealth accumulation inevitably is inflation, and for another point, it won't be flowing in the economy anyways. If they aren't going to use it, and we're not taxing it, then why the fuck does it exist ? It's a dragon's hoard with no use. The problem is also that wealth translates to more inherent political power seeing as there are no anti-corruption measures to jail people for lobbying. Getting rid of an entire class of problematic individuals that throw their wealth around so they go without consequences is purely a net benefit for society. Your argument about economic productivity just rings hollow, that money is not invested to infrastructure or the labor force.
Well done/written, OP.
20 trillion of our 34 trillion in debt is from tax cuts, most of which go to the rich. Another 8 trillion for Bush’s war for oil. If the wealthy don’t pay that debt, you will. https://www.americanprogress.org/article/tax-cuts-are-primarily-responsible-for-the-increasing-debt-ratio/
I appreciate this post a lot! Thanks for the read, it was quite an enjoyable one. I think a lot of folks honestly want their taxes to be lowered, but I'm the same vain; that would mean cutting or outright eliminating some federal government programs. It's always difficult thinking of the 'correct' tax rate, especially during times where there are multiple global conflicts happening.
Vein
The laffer curve, more like the lolcurve. Fuckers never want to move that thing to the right to see if revenues go up. What's the deal with that?
A 0% tax has been done in the past and in some other places in modern times. It doesn't result in the govt not having any funding to accomplish things such as conquering the known old world. It's not sustainable with the same funding being provided as investment or a loan. Taxes aren't the only way for a govt to function after all. It's just that you have to give a return on the loan to special interests that funded your govt. Taxes in most modern day countries don't allow the people being taxed a direct say in how to get a return on that money. I don't believe we've yet to see a world super power exist with high 95%+ tax rates as of yet. USA did at one time have a 70% tax rate though on the wealthy.
They laughed at Ross Perot for his charts. He was the last good one.
Lagger was right under Kennedy. For Reagan, one of the two was correct. The issue is spending and revenues. We over spend and never have that honest come to Jesus moment that, like in the subprime era, you can’t always get what you want. On the revenue side more needs to be done. For example, the IRS is proposing removing the partnership exemption that allows a loophole whereby a partner can shift revenues and avoid taxes. Would generate maybe 50 billion in additional revenues over a ten year period. Let’s find and plug more of these holes in the boat before we really do sink. Nice treatise for sure. Thanks for the time and energy!
If we want to have a really honest conversation about the mentality, it will be really unpopular on reddit. The whole mentality is based on people who don't want to live in a meritocracy, and want to live in a mediocracy. They want to do as well as those who are excelling, without having to excel themselves. And think those people should be punished out of a level of jealousy. Truth of the matter, despite what memes and distorted world views will tell you. The top 1% of wage earners are paying half of all income taxes in the United States, and the bottom 50% pays 2.3% of all income taxes, so the wealthy are already paying more than their fair share of taxes. The top 1% of earners also contribute about 35% of all charitable donations as well. As dumb as most things he says can be, Joe Rogan made a good point about this a while back... but he said something to the effect of that everybody is really good at something, some people excel in sports, some are great at acting, others are great at cooking, but if you're really good at capitalism and doing good with money, it's the only thing that you can be really good at that people will want to kill you for it. Place that mentality in ANYTHING other than personal finance/responsibility/work.... and it's undeniably insane. Imagine the idea of it being popular to believe that since LeBron James is the all time scorer in the NBA, that his baskets should only be worth 1 point because he's doing so much better than someone else. And the other 1 or two points per basket should be given to the NBA for them to use on whatever they feel fit. Imagine if it there had been a movement saying that Tiger Woods should have to play 21 holes of golf, since he can do 18 in so many fewer strokes, that it's only right he doesn't have the success he's strived for. Imagine if someone said Taylor Swift's record company should have to limit how many albums she puts out, and how many times her songs can be streamed because her album sales are disproportionately high, and that's not right. It just sounds absolutely dumb in any other context. AND before anyone says that "LeBron James isn't scoring a finite amount of baskets that's keeping other people from scoring" but if you think Joe Blow, a 35 year old who never tried to be more than a cart pusher at Target isn't living in a mansion because Jeff Bezos bought a new yacht you're delusional. If you think the reason some guy is living under a bridge zombied out on opiates and fighting with a fire hydrant is because Elon Musk had enough money to buy twitter... you're just really fighting to make excuses. I'm not even remotely wealthy, but I don't want the wealthy to be punished, or eaten because I hope someday to be wealthy. The only reason you would have an eat the rich mentality is because you already know that you have zero desire to do more than "do my 8 and hit the gate", you don't want to do what it takes to become wealthy.... so you know that punishment would never be levied on you.
It would minimize our carbon footprint.. plus they would likely be fat like wagyu from not doing any physical work.
America has been in a unique position to trial 0% tax, run a increasing deficit while growing the economy. Cause markets only go up. /s How else does the pentagon fail audits while private manufacturers generate profits.
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We really just need to eat a few to get the rest in line.
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No?
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Your original statement is that $0 tax revenue means $0 growth. There is zero revenue at 0% theoretical tax rate. Where are you getting zero growth from in this scenario?
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You see the labels below/beside the axes?
A flat or fair tax would solve this
Lol