Should top Marginal income tax rate exceed 50%

[mileslunn]

Some economists argue having top marginal rates over 50% needs to avoided as it leads to lower growth and a brain drain.  Others argue top marginal rates can go over 50% without too much harm.  In your jurisdiction do you support the top marginal rate exceeding 50% or being less than it or does it depend on circumstances.  If you live in a jurisdiction with taxes at multiple government levels, than this is for the combined rate at all levels.  Other taxes like property, sales tax are excluded while payroll taxes are only included if they are not capped.  Using OECD data it appears at the moment when you include payroll taxes the following exceed 50%.  Note these are averages, for example in Canada, there are three provinces with top combined rates under 50% while in the US, California exceeds 50%.

Canada
Sweden
Denmark
Finland
Netherlands
Belgium
Ireland
France
Austria
Portugal
Greece
Slovenia
Israel
Japan

While below 50%

United States
Mexico
Chile
Iceland
Norway
Germany
Luxembourg
United Kingdom
Switzerland
Spain
Italy
Estonia
Latvia
Poland
Czech Republic
Slovakia
Hungary
South Korea
Australia
New Zealand

[DC Al Fine]

Well, if it's like 52% it's not a big deal, but the 60, 75, 90% plus rates that some of the maroon avatars like to throw around would be ineffective and counterproductive.

[mileslunn]

Well, if it's like 52% it's not a big deal, but the 60, 75, 90% plus rates that some of the maroon avatars like to throw around would be ineffective and counterproductive.

Even 52% is not ideal, but depending on where it kicks in and how many deductions are available it is possible to put that high without too big a damage.  I think 40-45% is probably the optimal rate but obviously well above that is a problem as opposed to a little.  Note of the OECD interestingly enough, none of them have top rates exceeding 60%, Sweden is the highest at 57%.  France tried putting it at 75% a few years ago but had to scrap it as it was a failure.

[parochial boy]

The answer is almost certainly "it depends". For exampe, a transparent system used to calculate taxable income, and transparency over spending requirements tends to allow for more effective collection of taxes, surprisingly...

It is also the case that lots of OECD countries have various Social Security type taxes that are paid, at varying rates, on your income. And in addition, quite how you calculate income varies from country to country, which can have quite a big impact on what the nominal marginal rate actually is.

[RFayette]

I would prefer it didn't.

[YE]

Yes, maybe higher, but the top tax rate should be only paid by literally people who make 8-9 figures.

[RINO Tom]

I would prefer it didn't.

[UlmerFudd]

I would prefer it didn't.

[buritobr]

If all the countries have a 70% rate is OK, but if a single country has this rate, the millionaire will move to other countries, and so, they will not pay the 70% anyway.

In the immediate post WWII time, all the developed countries had very high top marginal income tax rate and they had high gdp growth rates

[Ban my account ffs!]

During times of war or disaster recovery, yes.  Otherwise I think the top rate should approach but not exceed 50%.

[RINO Tom]

If all the countries have a 70% rate is OK, but if a single country has this rate, the millionaire will move to other countries, and so, they will not pay the 70% anyway.

In the immediate post WWII time, all the developed countries had very high top marginal income tax rate and they had high gdp growth rates

Can't speak for other countries, but hardly anyone in the United States in, say, the 1950s was paying the tax rates we conveniently throw around to "prove" that the tax burden was higher on the wealthy then.

[mvd10]

If all the countries have a 70% rate is OK, but if a single country has this rate, the millionaire will move to other countries, and so, they will not pay the 70% anyway.

In the immediate post WWII time, all the developed countries had very high top marginal income tax rate and they had high gdp growth rates

Can't speak for other countries, but hardly anyone in the United States in, say, the 1950s was paying the tax rates we conveniently throw around to "prove" that the tax burden was higher on the wealthy then.

And let's not forget that taxes are only 1 part of the equation. Ceteris paribus ("all things unchanged") is a thing in (economic) research. Perhaps tax rates negatively impacted growth in the 1950s while other variables that positively impacted economic growth were strong. To know the true causality between two variables you have to look at the whole picture and spend hours in STATA/other econometric software making up linear regression models with endless variables. It's too simplistic to say that high taxes don't harm the economy because taxes were high during a boom period (and it's also simplistic to say that tax cuts positively affect economic growth because the economy grew after taxes were reduced). What about other things that may affect the economy? A country with extremely high taxes but a strong natural workforce growth may perform better economically than a country with extremely low taxes and an ageing workforce, but that doesn't say extremely high taxes are great.

Anyway, personally I think the top marginal rate shouldn't exceed 50%, but that's more because of ideological reasons. I don't think top rates really affect the economy once they're below a certain level. I've read a study that claimed that the revenue maximizing tax rate (idk what the threshold was) depends on the income concentration at the top. The Dutch revenue maximizing top rate would be 49%, so I guess we have a practical reason to cut our top rate .

[Coolface Sock #42069]

Haha, no.

The current mid-thirties level is plenty.

[progressive85]

I always wondered what would happen if we ended taxation completely, and instead have the government create new industries that would generate profits, which would then be used to pay for services.  For example if the government nurtured a new kind of technology.  The U.S. government has been in business before, its spending has spurred the creation of new inventions.

We could create a national university and make a deal with students: we'll pay for your degree in chemistry, if you work in our lab and whatever you create becomes property of the United States, allowing the government the exclusive right to sell it.

[DC Al Fine]

I always wondered what would happen if we ended taxation completely, and instead have the government create new industries that would generate profits, which would then be used to pay for services.  For example if the government nurtured a new kind of technology.  The U.S. government has been in business before, its spending has spurred the creation of new inventions.

We could create a national university and make a deal with students: we'll pay for your degree in chemistry, if you work in our lab and whatever you create becomes property of the United States, allowing the government the exclusive right to sell it.

So like a petrostate?

[UncleVolodya]

Marginal Total✓

[Virginiá]

I always wondered what would happen if we ended taxation completely, and instead have the government create new industries that would generate profits, which would then be used to pay for services.  For example if the government nurtured a new kind of technology.  The U.S. government has been in business before, its spending has spurred the creation of new inventions.

We could create a national university and make a deal with students: we'll pay for your degree in chemistry, if you work in our lab and whatever you create becomes property of the United States, allowing the government the exclusive right to sell it.

That is a bit far in my book, but I am very sympathetic to a system where the government mines/extracts the resources (fossil fuels, precious metals, other things like that) and sells it with a focus on domestic sales/uses. The idea being that if we're going to dig up and utilize all these finite resources from our own land, we - the people - might as well benefit from it, as opposed to a small number of wealthy executives/investors. Perhaps some sort of system with mining on private lands could be done, but with the govt taking a substantial cut of the profits that come from those resources.

Resources may never be an issue again if we can efficiently mine asteroids/other planets/moons, but as it is now, we only have a finite amount of these things, and I'd rather the benefits of what we have be shared than hoarded among a limited number of people.

[Skill and Chance]

I'm OK with the top rate going over 50%, but I would want to make other taxes deductible enough that no living person pays a total of more than half of their income in taxes each year.  Something like 60ish% over $1M, 50ish% over $500K, and 40ish% over $300K, while keeping the current brackets below that seems optimal.

[Person Man]

There should be marginal brackets of 1M and 5M, respectively of 44% and 50%. The current top bracket should be restored.

[MR DARK BRANDON]

No. In my opinion, we should cut taxes.

[Kyle Rittenhouse is a Political Prisoner]

A top rate over 70% will literally return less income than a lower tax rate.

[Antonio the Sixth]

Of course. The only worthwhile question is whether it should exceed 100%. I'm open to arguments about that.

[Torie]

Most certainly not, if we are just talking about the federal income tax rate. For the top bracket, an income tax rate of about 50% that includes state and local taxes is probably about right, meaning the top federal rate should be around 40%.

[mvd10]

Of course. The only worthwhile question is whether it should exceed 100%. I'm open to arguments about that.

Exceed 100%? Why on earth? 100% (or even 90% for that matter) would do enough to discourage people from earning a sh**tload of money and I can understand that from a socialist point of view, but letting it exceed 100% would even scare off people who're just genuinely passionate about their work.

[parochial boy]

Of course. The only worthwhile question is whether it should exceed 100%. I'm open to arguments about that.

Exceed 100%? Why on earth? 100% (or even 90% for that matter) would do enough to discourage people from earning a sh**tload of money and I can understand that from a socialist point of view, but letting it exceed 100% would even scare off people who're just genuinely passionate about their work.

Would presumably be used precisely to disincentivise certain types of work/behaviour. Like if you taxed certain types of capital gains (repatriated cash where you can't identify the source, for instance) as income and as as capital gain in order to dissuade tax avoidance.

Marginal rates over 100% can and do exist. Like, in quite a few countries you can wind up paying over 100% if you make excessive pensions contributions (presumably to stop people using pension pots as a means to avoid taxes); and famously Astrid Lindgren had a 102% marginal rate at one point as a self-employed person in Sweden had to pay both income tax and employer's social security contribitions.