Oops!!!!

[Werewolf]

Except you example is not relevant, as the our tax rates are bracketized, meaning that the initial $49,999 is taxed the same rate in either scenario. The higher marginal tax rate would be on any any additional income earned in the higher brackets.

I'm a Libertarian too, so I'm not arguing necessarily for a higher tax rate on higher incomes. But I am compelled to correct disinformation.

You are correct about marginal tax rates and how they work.

However, you are forgetting that one has to work just as much if not more to cross the bracket.

The Doctor referenced earlier cut back his practice to 3.5 days. Why? He made a rational economic decision.

If he works 3.5 days to take home say $2000 after taxes he takes home $571 per day. If he works 5 days and as an example now takes home after taxes $3000 he is now earning $600 per day. So he had to work and extra day and a half to take home an additional $145 ($29/day for 5 days). Depending on how he values his time and effort determines the decision he makes re: working more.

Does that happen. Yes it does especially to those that are riding the line close to earnings that put them in the next higher bracket. It happened to my father more than once in the 80's and got to a point where he told his employer to not give him a raise again until it would be large enough that he would actually take home more instead of less due to the raise. He was a very high income earner and ended up taking a raise about every third year.

You may want to look into economic indifference theory for an explanation of the choices consumers make for a more detailed explanation as to why one would accept less income to get more free time and less work.

Its a complicated subject and is one of the most fundamental foundations of economics.

 

[Glocktogo]

Businesses were not driven overseas. Look at Wrangler, every small town had a sewing factory, NAFTA made it easy for them to move to Mexico where labor was cheaper.

In 1987 a pair of Wranglers cost about $14-17 bucks. After NAFTA the cost went up although labor went down. Then what, they get Chinese to make them even cheaper, yet the cost of a pair of Wranglers went up even more.

We dont have the natural resources to supply the entire world with products to buy, yet we need to provide some meaningfull jobs for our citizens.

The scales of the free global market and unchecked capitolism need to be brought to balance. We're not going to stop the global economy from growing but we do need to reign in US capitolism a little. Thats within our control.

You're out of touch. You might want to educate yourself on the full circumstances of the issue before making statements like that. As for the cost of consumer goods, have you compared the cost of 1987 Wranglers against other common consumer goods and converted them into 2012 dollars? Without a comparative cost analysis, your examples are pretty meaningless.

I feel like there are several folks who think we have higher corporate taxes in the US than "other countries".

I'd love to see some examples - I know of slowly developing nations that are luring corporations into best-shoring by way of a promise of next to zero taxes, but in all honesty with the US tax-code (and corporate lobbyists and legal/accounting staff), I don't think a single public-funded corporation in the US actually pays their full "tax rate" no matter how you define it. They would honestly be stupid to do so if the loopholes were handed to them (and they are).

The problem is, some companies and corporations are better positioned to take advantage of those loopholes. This causes a comparative imbalance in assessed tax rates that inhibits free market capitalism. We no longer have the sort of free market capitalism that Lurker66 alludes to. We have faux market capitalism where someone's thumb is always on the scales. Correct the imbalance and a lot of our market woes will disappear.

 

[Hobbes]

That would make more sense to raise it if they pass it.

Don't forget that the payroll tax cuts that were part of Obama's stimulus bill expire on Dec 31st and no one on either side is proposing to extend them.
So, anyone who has earned income will see a FICA and Medicare tax increase on Jan 1st regardless of the individual tax rate decision.

 

[inactive]

You are correct about marginal tax rates and how they work.

...

You may want to look into economic indifference theory for an explanation of the choices consumers make for a more detailed explanation as to why one would accept less income in order to pay less taxes, get more free time and less work.

Its a complicated subject and is one of the fundamental foundations of economics.

Actually I've looked into it. In fact I have a dadgum B.A. in Economics, my friend

You are correct it is a fundamental concept in Economics, actually in the introductory course of microeconomics. The concept is that of the Law of diminishing marginal utility. That is, the worker sees less marginal utility for his dollars earned (namely because he's too busy working to have time off to enjoy the time/money with his family).

I did try to allude to that in my earlier comments, but apparently that part keeps getting missed:

there will be a point of diminishing marginal return where the net gain is so small that working more just isn't worth it the effort.

 

[Hobbes]

Regarding the premise of the OP, that high income earners will flee the country if we raise their top marginal tax rate by 4 points, here is the US historical top individual tax rate:

Our millionaires and billionaires didn't flee the country when their tax rates were 91%.
In fact, they continued to invest and make money even more in order to overcome those rates.

I'm not scared that they will flee the country now because their tax rate will go up from 35% to 39.6%

 

[Werewolf]

Actually I've looked into it. In fact I have a dadgum B.A. in Economics, my friend

You are correct it is a fundamental concept in Economics, actually in the introductory course of microeconomics. The concept is that of the Law of diminishing marginal utility. That is, the worker sees less marginal utility for his dollars earned (namely because he's too busy working to have time off to enjoy the time/money with his family).
I did try to allude to that in my earlier comments, but apparently that part keeps getting missed:

Then it seems we are in agreement (for the same reasons) that some high earners will decide to work less and earn less if their tax rates go up. Thus reducing overall tax revenues from those high earners instead of increasing them as the knotheads in government who rely on a static collections model believe.

 

[Hobbes]

Then it seems we are in agreement (for the same reasons) that some high earners will decide to work less and earn less if their tax rates go up. Thus reducing overall tax revenues from those high earners instead of increasing them as the knotheads in government who rely on a static collections model believe.

Keywords emphasized by me.

Some may work less but most will work the same and the total amount of revenue will increase.

Clark Gable never turned down a movie role because his tax rate was 91% and Howard Hughes never gave up on an airplane because his tax rate was 91%.

 

[inactive]

Then it seems we are in agreement (for the same reasons) that some high earners will decide to work less and earn less if their tax rates go up. Thus reducing overall tax revenues from those high earners instead of increasing them as the knotheads in government who rely on a static collections model believe.

In agreement? Pretty much! Emphasis on some for sure. Irrational behavior does happen though, particularly when the utility is relative to the individual worker. This would be a fascinating course to take, and it's free.


The microeconomics part aside, there is still a huge macroeconomic debate on whether reducing tax rates grosses more tax revenue. This a good read: http://www.factcheck.org/2012/08/romneys-impossible-tax-promise/ (the Analysis section). If you ignore the conclusion that states " He’s promising that the share of taxes won’t change. He has failed to prove that’s possible. And based on available evidence, we don’t see that it is," you can garner some pretty good insight (the disputing reports) on the matter to make your own conclusions.

 

[Glocktogo]

Regarding the premise of the OP, that high income earners will flee the country if we raise their top marginal tax rate by 4 points, here is the US historical top individual tax rate:

Our millionaires and billionaires didn't flee the country when their tax rates were 91%.
In fact, they continued to invest and make money even more in order to overcome those rates.

I'm not scared that they will flee the country now because their tax rate will go up from 35% to 39.6%

Keep in mind that during those high rate periods, global wars, strife and conflict were at their peak while US nationalism was also high. Also, the practice of "offshoring" wasn't nearly as prevalent or refined as it is tooday. Don't discount the premise that as much as the rate itself, the government's intended use of the revenues is a psychological factor. Remember, you don't have to physically leave the country to offshore money.

 

[Hobbes]

Keep in mind that during those high rate periods, global wars, strife and conflict were at their peak while US nationalism was also high. Also, the practice of "offshoring" wasn't nearly as prevalent or refined as it is tooday. Don't discount the premise that as much as the rate itself, the government's intended use of the revenues is a psychological factor. Remember, you don't have to physically leave the country to offshore money.

I agree with that.

Those in the best position to offshore their money will do that no matter what our tax rate is because it will always be higher than the rate in the Caymans.
Mitt Romney is a perfect example. And his tax rate is 12-14% over the last ten years of the Bush tax cuts according to his auditors.
He would have offshored that money even if his rate was only 20% or 10%.