Reply #90: I really don't think it's smart to go above 60%

[IndyPragmatist]

Think about it from the perspective of that person, the motivation for a business owner to hire more workers and increase production is the hope that their personal income will increase from these decisions. If you put to high of a tax rate on someone line this, you are reducing the likelihood that they will hire new workers and increase production. Adding workers is always a risk. The market may change and that employee may not be very useful, you may hire a bad employee, or your personal situation may change and it may be more beneficial to not have that employee on payroll. Since we cannot predict the future, we need to have a tax rate that provides enough incentive to counter the risk incurred by increasing production and employment.

A 95% rate would kill business. While most large businesses are public and owned by thousands of individuals, many mid-sized businesses are owned by a single or small amount of individuals. Many of these people would fall into the $1,000,000 range. If someone is only going to receive 5% of everything earned beyond that, they probably won't care about increasing production and employment unless they are confident that this will equal a massive return (to where 5 cents on the dollar still adds to a lucrative amount).


This is where Economics and Psychology overlap. So much of economics is based on individual decisions and the desire to make money. We want business owners to produce as much and employ as many people as possible. So at what tax rate does that person begin to think that it isn't worth the effort and risk to make more money? I think 95% is well beyond that level. If I made $1mil and I only got 5% of everything beyond that, I wouldn't have a whole lot of motivation to work more to make that. Because of this, I really don't think that you can go beyond 60 or 65%. That seems to me as the point where I would begin to lose motivation to work more.

I also think that everyone should pay some taxes. I know it sounds cold-hearted to want to make someone only making $20k/year to pay taxes, but I think they need to pay something (about 10-15%) just to ensure that they are not distanced from government spending. For many people, if they don't have to pay for something, they are all for it, but if they have to foot part of the bill, they may reconsider. I think this will make people think more about the value of programs and spending, instead of just voting to increase the number of programs that will impact them personally. I think that the fact that they are paying SOME income tax will ensure they vote logically and not out of greed.

So my thought? I would like to see the sales tax increased (placing the tax burden on consumption and not production allows money to "work" and grow at a higher level) to maybe 10%. There is a huge amount of wealth in America that is "old money". These people aren't making any income, but living off of savings and trusts. I know Paris Hilton makes some income (apparently some people are dumb enough to pay her), but she spends much more than she makes because she is living off of the Hilton family fortune. Maybe you could increase the sales tax to 20% on purchases (not including homes and autos) over $10k. This would make people that fall into this group pay some of the tax burden.

Below $30k - 10-15%
Up to $50k - 20%
Up to $75k - 25%
100k - 30%
250k - 40%
500k - 50%
1 mil- 60%
5 mil and beyond -65%

I would also like to see more money shifting from the federal government to state governments. While we may elect Congressmen and the president nationally, federal employees in DC tend to be from DC or the area. By shifting the power a little more to states, you will have elected officials and employees that are more representative of the population that they serve. Instead of having a group of employees from DC providing services for people nationwide.