My question is How high can tax rates go is it true can tax rates can't go past 100%?

[tradeunionsupporter]

My question is How high can tax rates go is it true can tax rates can't go past 100% because 100% would be all of a person's Income therefor if we have a Progressive Tax or a Flat Tax the tax rates can't go past 100% the reason Im asking this question is because in the United States of America we have had 90% tax rates than 70% tax rates on the Rich/Wealthy and we still had Capitalism the Tea Party people seem to think that a Progressive Tax System equals Socialism which makes no sense to me because Adam Smith supported Progressive Taxes in his Book the Wealth of Nations and he was a Capitalist right ?

http://en.wikipedia.org/wiki/Progressive_tax

http://en.wikipedia.org/wiki/Adam_Smith

http://en.wikipedia.org/wiki/The_Wealth_of_Nations

[Judicator]

You could theoretically set tax rates to 200%.

As a more realistic example, sales taxes on cigarettes are above 100%, so any income being used to purchase them is effectively being taxed at a rate above 100%.

[Nox]

A progressive income tax will stop at 99.999% followed by an infinite number of 9's which is technically equal to 100%, but this is for people who have infinite wealth :D

[tradeunionsupporter]

You posted this are you saying that Sale's Tax could be above 100% also are you saying that a Income Tax could be above 100% or only a Sale's Tax thank you ?


You could theoretically set tax rates to 200%.

As a more realistic example, sales taxes on cigarettes are above 100%, so any income being used to purchase them is effectively being taxed at a rate above 100%.


http://www.revleft.com/vb/my-question-high-t158944/index.html

[RichardAWilson]

The Marginal Income Tax Rate shouldn't ever move above 100%.

Furthermore, a tax above a certain level will discourage work and thrift. (I.e. If every dollar you earn is taxed in full, you're not going to work).

There has been much debate on which Marginal Rate maximizes overall tax revenue. It's obvious that 90% was too high and led to lower overall collection.

JFK reduced the rate to around 70%, which resulted in an increase in revenue.

This idea came to be known as the "Laffer Curve." The problem is that the Laffer Curve does show that once the Marginal Rate falls below a certain level, it will cause overall tax revenues and collections to decline.

In 1981, Reagan axed the maximum rate from 70% to 50%. The effect on tax revenue was minimal.

In 1986, the tax rate was axed again, this time to 28%. Income tax collections from the rich fell after that reduction.

In 1993, Clinton raised the rate back to around 40%, which led to an increase in tax collections from the rich.

The question shouldn't be: "how high can tax rates go?" The question should be: "what's the revenue maximizing tax rate?"

IMHO, It's somewhere between 50% and 70%.

[RichardAWilson]

Notice the changes in income tax rates and income tax revenue as % of GDP.

http://i.huffpost.com/gen/267149/MARGINAL-TAX-RATES.jpg

http://www.deptofnumbers.com/blog/2010/08/xcomponent-tax-revenue.png.pagespeed.ic.vDBpuISXbr.png

[Revolutionary_Change]

well there's expropriation...

[jake williams]

Hypothetically you can have personal income taxes above 100%. If you have a billionaire making a total of $50 million dollars a year, including interest, you could hypothetically collect $100 in tax from them every year for 20 years until they're forced to either borrow money or evade the tax.

But in practice that sort of thing won't happen for all sorts of reasons.

[Sperm-Doll Setsuna]

Hypothetically you can have personal income taxes above 100%. If you have a billionaire making a total of $50 million dollars a year, including interest, you could hypothetically collect $100 in tax from them every year for 20 years until they're forced to either borrow money or evade the tax.

But in practice that sort of thing won't happen for all sorts of reasons.

Sweden had an effective marginal income tax for the highest income bracket of just over 100% in the 1970's (I think 102-105%).

[jake williams]

Sweden had an effective marginal income tax for the highest income bracket of just over 100% in the 1970's (I think 102-105%).
You can get away with top marginal tax rates being close to or even above 100% but it can't last. It's a small-scale expropriation - you "earn" some money, and not only do you have to give up that money, but other money you already have.

There isn't necessarily anything wrong with it, but the bourgeoisie won't put up with it for very long.

[Sperm-Doll Setsuna]

You can get away with top marginal tax rates being close to or even above 100% but it can't last. It's a small-scale expropriation - you "earn" some money, and not only do you have to give up that money, but other money you already have.

There isn't necessarily anything wrong with it, but the bourgeoisie won't put up with it for very long.

That is definitely true. Wealthy people started writing letters to the editors and press went haywire, and the then social-democratic government lost the following elections (where the opposition promised to reverse the tax reform), and the then minister of finance was held in bad regard for the taxes and phased out of politics by being put in charge of the central bank (as a token gesture) until retirement (by which time the entire social-democratic apparatus had embraced neo-liberal economic policies entirely).

[tradeunionsupporter]

Do the Rich/Wealthy Capitalists have so much money millions and or billions of dollars that they would not care if their tax rates went above 100% since they have so much money ?

[RichardAWilson]

The answer to your question is "No." Would you continue investing if you believed you were going to suffer a loss? Would you work if you were charged to work? Reagan, as a movie actor, would work a few months and vacation the remainder of the year. Why? His Marginal Income Tax Rate was 90%. Furthermore, financiers and institutions will make behavioral changes in preparation for higher tax rates.

(I.e. Reallocating one's savings from Taxable Corporate Bonds to Untaxed Municipal Bonds, selling stocks and borrowing money for tax deductible investments in housing, etc.)

It wasn't surprising that income tax revenue increased when the Marginal Rate was reduced from 90% to 70% during the Johnson Administration. The JFK tax-cutting program was successful for the economy and the IRS.

During Reagan's first term, the Marginal Rate was axed again from 70% to 50%. Tax revenue increased once again in absolute terms. However, here's where things become more complicated. As a % of GDP, income tax collections fell after the Reagan cutting. The reason was that the revenue maximizing tax rate for the super-rich is higher than 50%. Mainstream research in the field has shown the maximizing rate is between 60% and 70%.

Crude Illustration of the Tax Curve

http://upload.wikimedia.org/wikipedia/commons/thumb/9/96/LafferCurve.svg/512px-LafferCurve.svg.png
http://en.wikipedia.org/wiki/Laffer_curve#cite_note-20

The problem has been that since 1985, Washington has been working on the backward slopping side the Curve, meaning that marginal income tax rates have fallen below the revenue-maximizing rate. Each successive tax-cutting program (I.e. 1986, 1997, 2001 and 2003) has resulted in lower income tax collection.

[AnonymousOne]

The answer to your question is "No." Would you continue investing if you believed you were going to suffer a loss? Would you work if you were charged to work? Reagan, as a movie actor, would work a few months and vacation the remainder of the year. Why? His Marginal Income Tax Rate was 90%. Furthermore, financiers and institutions will make behavioral changes in preparation for higher tax rates.

(I.e. Reallocating one's savings from Taxable Corporate Bonds to Untaxed Municipal Bonds, selling stocks and borrowing money for tax deductible investments in housing, etc.)

It wasn't surprising that income tax revenue increased when the Marginal Rate was reduced from 90% to 70% during the Johnson Administration. The JFK tax-cutting program was successful for the economy and the IRS.

During Reagan's first term, the Marginal Rate was axed again from 70% to 50%. Tax revenue increased once again in absolute terms. However, here's where things become more complicated. As a % of GDP, income tax collections fell after the Reagan cutting. The reason was that the revenue maximizing tax rate for the super-rich is higher than 50%. Mainstream research in the field has shown the maximizing rate is between 60% and 70%.

Crude Illustration of the Tax Curve

http://upload.wikimedia.org/wikipedia/commons/thumb/9/96/LafferCurve.svg/512px-LafferCurve.svg.png
http://en.wikipedia.org/wiki/Laffer_curve#cite_note-20

The problem has been that since 1985, Washington has been working on the backward slopping side the Curve, meaning that marginal income tax rates have fallen below the revenue-maximizing rate. Each successive tax-cutting program (I.e. 1986, 1997, 2001 and 2003) has resulted in lower income tax collection.

There are huge problems with the Laffer Curve, it makes a lot of assumptions regarding the spending that bourgeoise engage in as suming that those expenses will make up in lost revenue.

For example, hiring more workers, investing etc.

[RichardAWilson]

Well, I believe a 100% marginal income tax rate is insane.

I also believe that further reducing a 35% marginal rate is insane.

The revenue maximizing rate, as I've said, is somewhere between 60% and 70%.

We're now working on the backward side of the Curve. We need to move to the maximizing rate.

[gendoikari]

My question is How high can tax rates go is it true can tax rates can't go past 100% because 100% would be all of a person's Income therefor if we have a Progressive Tax or a Flat Tax the tax rates can't go past 100% the reason Im asking this question is because in the United States of America we have had 90% tax rates than 70% tax rates on the Rich/Wealthy and we still had Capitalism the Tea Party people seem to think that a Progressive Tax System equals Socialism which makes no sense to me because Adam Smith supported Progressive Taxes in his Book the Wealth of Nations and he was a Capitalist right ?

http://en.wikipedia.org/wiki/Progressive_tax

http://en.wikipedia.org/wiki/Adam_Smith

http://en.wikipedia.org/wiki/The_Wealth_of_Nations
Um guys...... http://www.revleft.com/vb/theoretical-simplified-tax-t158991/index.html?p=2195579#post2195579

[Judicator]

Well, I believe a 100% marginal income tax rate is insane.

I also believe that further reducing a 35% marginal rate is insane.

The revenue maximizing rate, as I've said, is somewhere between 60% and 70%.

We're now working on the backward side of the Curve. We need to move to the maximizing rate.

What's inherently insane about reducing at 35% rate? We spend plenty on the military, that could be cut, we spend money to give old people 1-2 years of extra life, that could be cut, etc. A lot of money is being poured into things that are very bad investments (essentially any spending on the very young or the very old).

[RichardAWilson]

In that case, it'd make more sense to institute a 60% maximum marginal rate and use the revenue to reduce payroll taxes on lower and middle income households.

It'd even make more sense to increase tax rates on the super-rich and use the revenue to reduce tax rates on businesses.

[tradeunionsupporter]

My question is it true that Income Tax Rates can not go past 100% but taxes on gas or taxes on drinks or taxes on cigarettes can be included which would be past 100% ?

[RichardAWilson]

In theory, the income tax could move beyond 100% as a means of confiscation. However, it wouldn't work because everybody would stop working and investing.

No income, no confiscation.

[Apoi_Viitor]

My question is it true that Income Tax Rates can not go past 100% but taxes on gas or taxes on drinks or taxes on cigarettes can be included which would be past 100% ?

No, both income tax rates and taxes on commodities can go past 100%.

[Bronco]

Do the Rich/Wealthy Capitalists have so much money millions and or billions of dollars that they would not care if their tax rates went above 100% since they have so much money ?

Of course they'd care, heck they make a big enough fuss if it's anything over 50% and even then a lot of them move to "tax havens" like Switzerland or store assets overseas

[tradeunionsupporter]

According to this article Sweden in the 1970's had a income tax rate above 100% which was a 102% marginal tax rate my question is could a tax rate this high make the incomes equal and take all the wealth that the millionaires and billionaires have also I don't understand I have had people tell me tax rates on income can't go above 100% than I read this ?
Pomperipossa in Monismania
From Wikipedia, the free encyclopedia
"Pomperipossa in Monismania" (also called Pomperipossa in the World Of Money) is a satirical story written by the Swedish children's book author Astrid Lindgren in response to the 102% marginal tax rate she incurred in 1976. It was published starting on 3 March 1976 in the Stockholm evening tabloid Expressen and created a major debate about the Swedish tax system.

The marginal tax rate above 100% which was dubbed the 'Pomperipossa effect' was due to tax legislation which required self employed individuals to pay both regular income tax and employer's fees.

The story, a satirical allegory about a writer of children's books in a distant country, led to a stormy tax debate and is often attributed as a decisive factor in the defeat of the Swedish Social Democratic Party - for the first time in 40 years in the elections later the same year.
http://en.wikipedia.org/wiki/Pomperipossa_in_Monismania

[tradeunionsupporter]

100% tax = take all the income

the other 2% is taxed on the person's "holdings" - home, properties, etc... Basically a 2% tax on the person's net worth along with taxing away all income.

The person then loses money no matter what