What should the highest income tax bracket rate be?

[greenforest32]

Discuss

Also if you're deciding between the progressive income tax options just pretend that your preferred tax brackets (such as differentiating between $0-10k, $10k-100k, $100k-1m, $1m-10m, $10m-$100m, $100m-1b, etc) are in place.

Edit: I just realized it would have made more sense to list the options from highest to lowest (highest progressive rate to lower progressive rates to highest flat rate to lower flat rates to no income tax). Oh well

[angus]

Flat tax.  Probably somewhere around 40 to 50%.  You'd have to figure out how much we need to run the government, and base it on that.

How much does it cost to live?  40K maybe?  So the first 40 is tax free.  No income tax for anyone earning that amount or less.  If you earn 100K, then you pay the flat tax on the additional 60K.  This plan lowers the tax burden on folks making the median income.  Raises it on those in the 2nd quintile.  Raises it significantly on the top quintile.  Something like that seems reasonable.  

Mainly, we should collect enough revenue to run our government.  I'm not a fan of having my taxes raised, and I'd prefer severe spending cuts, but if we want to sustain the current levels of military spending, welfare, etc., then we need to collect the revenue.  

[opebo]

A progressive system with rates between 1 and 100%.

We should look to the obvious lesson of history for the ideal top rate - 70%, speaking very conservatively.  Though I would have no objection to 90%

[courts]

Ideally none, except for great philanthropists like Warren Buffet, Charlie Munger, Jamie Dimon, George Soros, etc. I think we should have a 100% wealth tax on them.

[Antonio the Sixth]

Progressive income tax, with rates going from 0% to 90% (maybe 100% for the most insane incomes). Of course that's not gonna happen in my lifetime.

[Politico]

Negative income tax coupled with the elimination of many social services departments/workers (i.e., they would largely be replaced by the transfers to the  poorest). Beyond the threshold point, implement a flat rate that satisfies the vast majority of the electorate (I am guessing it would be somewhere between 10-20%). Maybe even hold national elections every few months to determine the range of the flat rate (e.g., allow the choices to be 0-5%, 6-10%, 11-15%, 16-15%, ... , 96-100%, and then do a run-off every three months until you are only left with one range obtaining a majority of the electorate. After that, repeat the process on each individual value in the range until you determine the "democratically-elected" flat tax rate; repeat this entire process once every eight years or something like that).

There is an inverse relationship between personal responsibility and government spending, so we need to dramatically decrease the latter in order to achieve a stable, pro-growth society for the long-run. Besides, if you put taxes to an explicit vote, as outlined above, I suspect we will see that most people want a low tax society, and therefore lower government spending than currently.

By the way, this thread should be in the economics sub-forum.

[Antonio the Sixth]

Besides, if you put this sort of thing to an explicit vote, as mentioned above, I suspect we will see that most people want a low tax society, and therefore lower government spending than currently.

Only in the US, where people have been brainwashed by the anti-State propaganda for decades.

[greenforest32]

By the way, this thread should be in the economics sub-forum.

Should it? I thought all discussions about issues and policy changes (abolish the death penalty, legalize marijuana, etc) go in the political debate sub-forum.

[Marokai Backbeat]

A progressive system of rates between 1 and 75% seems the most desirable of the options, though it depends what that top rate actually consists of.

[Napoleon]

Top rate back to 39%
Millionaire bracket at 42%.

Capital gains up to $250k 0%
To $500k 15%
To one million 25%
Above that 35%

[Politico]

Besides, if you put this sort of thing to an explicit vote, as mentioned above, I suspect we will see that most people want a low tax society, and therefore lower government spending than currently.

Only in the US, where people have been brainwashed by the anti-State propaganda for decades.

Perhaps you will learn about the real brainwashing after France joins the PIIGS...

[Antonio the Sixth]

Besides, if you put this sort of thing to an explicit vote, as mentioned above, I suspect we will see that most people want a low tax society, and therefore lower government spending than currently.

Only in the US, where people have been brainwashed by the anti-State propaganda for decades.

Perhaps you will learn about the real brainwashing after France joins the PIIGS...

As far as I know, France's debt is better rated than the US's.

[Filuwaúrdjan]

Depends on the circumstances, doesn't it? And also what you're trying to do. I think it's fairly clear, though, that the top rate should be significantly higher than the rate which ordinary people pay. There's also no point having a billion and twenty three different rates.

At the same time, of course, tax havens should be nuked.

[lowtech redneck]

Depends on the circumstances, doesn't it?

This, but no more than 50% under any circumstances.  If at all practical, I prefer a sales tax (food and medicine exempted) plus a low flat tax for incomes above the poverty rate.

[republicanism]

The highest income group shouldn't pay less then 45-50%.

[Brandon H]

1%. People making over a million dollars a year: 1.1%. So we put a higher tax on rich people. Should make everyone happy.

[ZuWo]

At the same time, of course, tax havens should be nuked.

Some people claim that the UK has been and still is a tax haven itself. Frankly, I lack the in-depth knowledge about this issue to be truly able to judge this claim and I've seen contradictory points of view on the question whether the UK as a whole (and not only some of its oversea territories) can be considered a tax haven.
But if you agree with this assessment, where would you move if your country (and I assume you live in the UK) were nuked?

[Antonio the Sixth]

1%. People making over a million dollars a year: 1.1%. So we put a higher tax on rich people. Should make everyone happy.

Haha, good one.

[Associate Justice PiT]

     Option five would be great, though it depends on how much spending can be cut. Running a deficit is undesirable & it is far more difficult to cut spending than it is to cut taxes.

[TJ in Oregon]

If we're going to have a progressive tax structure, I say we eliminate the bracket system and replace it with a continuous function to determine the rate. I don't think having piecewise discontinuities is a good idea and creates unnecessary distortions, especially when we could just as easily use some other kind of function.

[phk]

1.) Move it to Econ board.

2.) Deadweight loss is approximately taxation squared so from a deadweightloss minimization perspective it is better to have a lot of small taxes as opposed to one big tax.

[RI]

If we're going to have a progressive tax structure, I say we eliminate the bracket system and replace it with a continuous function to determine the rate. I don't think having piecewise discontinuities is a good idea and creates unnecessary distortions, especially when we could just as easily use some other kind of function.

I've always thought about doing that, but I don't know what the exact effects would be, if any.

[phk]

If we're going to have a progressive tax structure, I say we eliminate the bracket system and replace it with a continuous function to determine the rate. I don't think having piecewise discontinuities is a good idea and creates unnecessary distortions, especially when we could just as easily use some other kind of function.

I've always thought about doing that, but I don't know what the exact effects would be, if any.

Like an econometric formula?

[Antonio the Sixth]

If we're going to have a progressive tax structure, I say we eliminate the bracket system and replace it with a continuous function to determine the rate. I don't think having piecewise discontinuities is a good idea and creates unnecessary distortions, especially when we could just as easily use some other kind of function.

I actually totally agree.

[TJ in Oregon]

Here are a couple plots I just made in Excel. The first is the current US income tax brackets for single filers. The tax rate is shown in black, the income tax paid in red, and the income after the tax in green:



To me this just seems stupid. Why do we need the discontinuities? Was it drawn by someone who never passed high school algebra?

As Wormyguy just pointed out I made a serious mistake in the original version of this. Here is the correct form in which the discontinuities are only in the derivative rather than the function itself. It’s still rather ugly.

 I fit the midpoints from each bracket using the sum of least squares method to an exponential decay function: T=35*[1-exp(-BI)]+A  where 35% is the maximum tax bracket, A = 9.93 and B = 0.0042. The result is shown in the following plot with the same color scheme:



The main reason why I am opposed to a progressive income tax bracket system like the US is that we've created distortions where someone would be financially harmed by getting slightly more income. This isn't limited just to the income tax but is also present in the hard cut-offs for countless government programs. To me it seems like pure sloppiness on the part of our elected officials to allow such discontinities when it only takes like half an hour to eliminate them.

There are still plenty of other programs this statement actually applies to though the income tax is strictly speaking not one of them. I still think we would be better off with a smoother function than that hideous piecewise thing.

 It's not even like this would add any beaurocracy to the process since calculating the income is what takes time and calculating a rate takes roughly ten seconds, ie. no longer than looking it up in a table.