Progressive Taxation Act (Failed)

[🐒Gods of Prosperity🔱🐲💸]

the regions must also collect revenues, so if you raise taxes on this money to 75%, it would mean effective marginal income tax rates around ~80%. 

while such a rate could restrict the ability of the regions to raise revenue, you would at least be promoting investment in Panama and the Cayman Islands.

I'm not taking sides here, but would note that the GM's Office currently assumes the deductability of state regional income tax from federally taxable income applies. Regional rates still increase the overall tax burden of course, but not in direct proportion to simply adding regional rates to federal rates.

okay - i guess in that case the situation is nearly reverse of what i stated. if it's fully tax deductible,  every regional increase in taxes on high incomes could be taking up to 75% of its additional revenue from the national government. so then with such a high rate, there is an incentive for the regions to raise taxes, because those taxes will be mostly funded by the nation at large.
the same principle would be true of any other tax deduction - the higher the national tax rate, the greater the incentive for people to spend or invest in ways they otherwise wouldn't in order to get the tax deduction. it's like having a 75% off coupon.

of course, instead of raising the rates, you might consider raising revenues by simplifying the tax code.

[Badger]

the regions must also collect revenues, so if you raise taxes on this money to 75%, it would mean effective marginal income tax rates around ~80%. 

while such a rate could restrict the ability of the regions to raise revenue, you would at least be promoting investment in Panama and the Cayman Islands.

I'm not taking sides here, but would note that the GM's Office currently assumes the deductability of state regional income tax from federally taxable income applies. Regional rates still increase the overall tax burden of course, but not in direct proportion to simply adding regional rates to federal rates.

okay - i guess in that case the situation is nearly reverse of what i stated. if it's fully tax deductible,  every regional increase in taxes on high incomes could be taking up to 75% of its additional revenue from the national government. so then with such a high rate, there is an incentive for the regions to raise taxes, because those taxes will be mostly funded by the nation at large.
the same principle would be true of any other tax deduction - the higher the national tax rate, the greater the incentive for people to spend or invest in ways they otherwise wouldn't in order to get the tax deduction. it's like having a 75% off coupon.

of course, instead of raising the rates, you might consider raising revenues by simplifying the tax code.

BTW: A bit of correction over semantics here. We're not talking about taxing "75%" of "all" earned income, only income above $4 mil a year (and the other proposed rates for single filers, etc). All income earned below that level is taxed just the same with the same deductions. A single filer who breaks into the 35% range is paying just under a fourth of income in taxes, and someone who breaks into the current 41% rate is paying about a third. A married couple earning $5.2 million annually will be paying essentially the same overall tax rate as before. Nothing major, just a point that's been irking me.

BTW: Here's one preliminary bit of analysis I litterally blundered into:

This proposed increase will effect less than 0.03% of taxpayers, or less than 40,000 households nationwide. More effected will be the top 0.01% of taxpayers, about 13,000 households earning at least $6 million a year, and with an average income of over $25 million a year within that hundredth-percentile. Particularly effected would be the top earning 400 households in the nation, each earning in excess of $100 million annually.

Note that an increase in income tax rates, while certainly relevant to these higher earners, would not reap as much of this income revenue as might be expected as these high incomes are disproportionately reliant on dividends and investment returns which are taxed as capital gains rather than ordinary income.

[Marokai Backbeat]

Superb insight so far, Badger.

I know I'm not a member of the Senate, but I am curious. What are the current capital gains tax rates? We could probably just use RL rates for those since I don't remember them ever being raised here in Atlasia.

[Antonio the Sixth]

Wait.. Dividends and capital gain aren't taken into account as income for the sake of the tax ?

We must change that. There's no reason for which stockholders should be exonerated from contributing to the social redistribution.

[Badger]

Wait.. Dividends and capital gain aren't taken into account as income for the sake of the tax ?

We must change that. There's no reason for which stockholders should be exonerated from contributing to the social redistribution.

There is a tax on capital gains, Antonio, its just lower than regular income tax.

@ Marokai: I would agree. Accordingly both Atlasian and RL capital gains tax is set at 5% for the lowest two income brackets and 15% beyond that. FWIW it was around 20% until the 2003 tax cuts.

[Sbane]

If you guys change the capital gains tax, make sure it's in line with the rest of the world. We don't want to discourage foreign investment in our equity markets.

[Antonio the Sixth]

There is a tax on capital gains, Antonio, its just lower than regular income tax.

So we basically take more money from people who actually earn their living by doing something, than from people who merely use their money to gain money ? Congratulation, Atlasia, you win the first prize for fiscal silliness !

[Associate Justice PiT]

If you guys change the capital gains tax, make sure it's in line with the rest of the world. We don't want to discourage foreign investment in our equity markets.

     How exactly would "in line with the rest of the world" be defined? Numerous countries have no capital gains tax & plenty more have a rate similar to that of Atlasia. Some have much higher rates, though following their examples would be ill-advised for the obvious reason of not wanting to inhibit economic growth while the economy is still weak.

[Sbane]

If you guys change the capital gains tax, make sure it's in line with the rest of the world. We don't want to discourage foreign investment in our equity markets.

     How exactly would "in line with the rest of the world" be defined? Numerous countries have no capital gains tax & plenty more have a rate similar to that of Atlasia. Some have much higher rates, though following their examples would be ill-advised for the obvious reason of not wanting to inhibit economic growth while the economy is still weak.

In line with the rest of the OECD nations (assuming Atlasia is one).

[Southern Senator North Carolina Yankee]

There is a tax on capital gains, Antonio, its just lower than regular income tax.

So we basically take more money from people who actually earn their living by doing something, than from people who merely use their money to gain money ? Congratulation, Atlasia, you win the first prize for fiscal silliness !

Everybody uses money to gain money. Thats the dumbest line of pseudo populism I have ever heard. Capital gains are the ROI for private sector investment. I consider investing not only doing something, but doing something pretty damn important. And lets not forget that we aren't talking about just rich folks and hedge funds here. We are talking about retirement accounts and pension funds which are often invested in a variety of assets. Not only are your taxing the ROI they accrue directly, but indirectly by the collective cummulative effect of a higher cap gains tax on the value of the assets in which they are invested (Simple economics 101, less ROI will lead to less demand for the assets, thus the assets decline in value).

Its not a casino. It is not a game of black jack (more populist bs which I can't stand, comparing it to gambling to demonize it). They serve an important purpose. Unless you think all investment in the economy can and should be from the gov't (which is both ridiculous and impossible), then I would encourage you to reach a greater understanding of their purpose and importance to the economy. 

If you guys change the capital gains tax, make sure it's in line with the rest of the world. We don't want to discourage foreign investment in our equity markets.

Who do you want to copy? Every country has a different rate, some have none.

[Fmr. Pres. Duke]

What is the capital gains rate in Atlasia? I don't think it needs to be higher than 20% or so and less than that for lower income brackets.

I'm going to ignore Antonio's comment because it really isn't something new for people to make money off money. If that is going to become illegal, well, we might as well shut this place down.

[Ban my account ffs!]

I think the capital gains tax should be higher than that.  Maybe more like 40% for the top gain income bracket.

While that is pretty high, it is also significantly lower than the top earned income bracket which still gives the wealthy an incentive to invest.

I'd support no capital gains tax on more modest incomes or on business owners investing in their own businesses.

[Sbane]

If you guys change the capital gains tax, make sure it's in line with the rest of the world. We don't want to discourage foreign investment in our equity markets.

Who do you want to copy? Every country has a different rate, some have none.

I would be fine leaving it where it is. The current rate would be 15% for the highest bracket. That is quite reasonable.

[Antonio the Sixth]

Thanks for distorting again what I said.
I still can't understand what in the world justifies that the government rewards investment more than labor.

[Badger]

What is the capital gains rate in Atlasia?

Accordingly both Atlasian and RL capital gains tax is set at 5% for the lowest two income brackets and 15% beyond that. FWIW it was around 20% until the 2003 tax cuts.

[Gustaf]

Without commenting for or against this bill, if I wanted to make a case for or against this bill's economic and budgetary impact I would go back to historical periods in time when we had higher marginal income tax rates (90% rates in the 50's have been mentioned thus far; the top rate was 70% for a decade until Kemp-Roth passed in 1981), and then make arguments as to what effect, if any, those higher marginal rates--as well as getting rid of them--had both on economic growth and budget revenues.

That's quite likely what the GM's office is going to do if this bill passes (amended or otherwise). As I'm not really sure right now exactly what the effects of raising top rates would be, I suggest making the case now.

As an economics student...the reason why these rates are history is not a neoliberal conspiracy like Antonio thinks, it's the fact that politicians realized they could scrap them without losing any revenue.

People with incomes on these levels already have people working for them on tax avoidance. It's a good example of a tax that is unlikely to be paid by everyone and leads to waste of resources on manipulating the tax system.

There is a reason for why no Western country today has a rate higher than about 55% or so.

[Gustaf]

Thanks for distorting again what I said.
I still can't understand what in the world justifies that the government rewards investment more than labor.

You don't seem to understand much about economics in general, I'm afraid.

1. You seem to think that taxes can only be avoided by fleeing the country. That's not the case. Whether the French government knows this or not, I don't know.

2. Investment returns are risky is one point. The more crucial point is probably that capital is mobile, why labour isn't. If you tax investment too highly no one will invest in your country. Also, investment is a choice in a way that working isn't. If you raise taxes on working too much eventually people will not work. But the bar there is pretty high, because people who don't work will have to survive on welfare and even in welfare states that's not too good.

On the other hand, no one HAS to invest. If you're going to get taxed to hell, you might as well sit on the money, consume it or invest it elsewhere. So it is more tax sensitive. Which is why income from work is taxed higher than income from capital in every country I know (except those with flat rates of course!).

3. I don't see why providing capital to the productive process should somehow be morally inferior to providing labour.

This seems like typical misinformed populist nonsense. Most grown up people (luckily) learnt the lesson of the 70s to not pursue stupid economic policies for ideological reasons. I hope this forum won't force us to go through the painful process of restructuring the economy again after introducing poor economic policies.

[Badger]

Without commenting for or against this bill, if I wanted to make a case for or against this bill's economic and budgetary impact I would go back to historical periods in time when we had higher marginal income tax rates (90% rates in the 50's have been mentioned thus far; the top rate was 70% for a decade until Kemp-Roth passed in 1981), and then make arguments as to what effect, if any, those higher marginal rates--as well as getting rid of them--had both on economic growth and budget revenues.

That's quite likely what the GM's office is going to do if this bill passes (amended or otherwise). As I'm not really sure right now exactly what the effects of raising top rates would be, I suggest making the case now.

As an economics student...the reason why these rates are history is not a neoliberal conspiracy like Antonio thinks, it's the fact that politicians realized they could scrap them without losing any revenue.

People with incomes on these levels already have people working for them on tax avoidance. It's a good example of a tax that is unlikely to be paid by everyone and leads to waste of resources on manipulating the tax system.

There is a reason for why no Western country today has a rate higher than about 55% or so.

Interesting. FWIW everyone here's some tables of relative tax rates worldwide (capital gains and corporate tax rates are not included, however). It's Wikipedia, so caveat emptor).

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

[Gustaf]

Without commenting for or against this bill, if I wanted to make a case for or against this bill's economic and budgetary impact I would go back to historical periods in time when we had higher marginal income tax rates (90% rates in the 50's have been mentioned thus far; the top rate was 70% for a decade until Kemp-Roth passed in 1981), and then make arguments as to what effect, if any, those higher marginal rates--as well as getting rid of them--had both on economic growth and budget revenues.

That's quite likely what the GM's office is going to do if this bill passes (amended or otherwise). As I'm not really sure right now exactly what the effects of raising top rates would be, I suggest making the case now.

As an economics student...the reason why these rates are history is not a neoliberal conspiracy like Antonio thinks, it's the fact that politicians realized they could scrap them without losing any revenue.

People with incomes on these levels already have people working for them on tax avoidance. It's a good example of a tax that is unlikely to be paid by everyone and leads to waste of resources on manipulating the tax system.

There is a reason for why no Western country today has a rate higher than about 55% or so.

Interesting. FWIW everyone here's some tables of relative tax rates worldwide (capital gains and corporate tax rates are not included, however). It's Wikipedia, so caveat emptor).

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

In what in Sweden is called "the tax reform of the century" a bipartisan deal on taxes was struck in 1990. Some of the cornerstones were cutting the highest marginal tax rate from 75% to 50%, cutting the corporate tax in half (from 56% to 28% or something like that), introducing a unified tax on all capital gains (30%), a unified VAT of around 25% and eliminating all sorts of loopholes and deductions. It didn't cause any loss in revenue and is generally hailed as a large step forward.

It should also be noted that when capital gains taxes are considered you have to remember that these often come from owning stock and then you have to take into account the "double taxation" effect coming from the fact that dividends distributed to stock holders come from corporate earnings that have already been taxed once. Also, one usually doesn't compare the highest marginal tax rate for working with the (usually) flat rate on capital gains, but rather the standard, low rate. In Sweden that would be 30% for both.

The basic economic principle is really to have a flat tax. I mean that in the sense that from the perspective of revenue raising that is probably optimal. The problem is that it isn't feasible from the perspective of income distribution, because it would be too burdensome for those with low incomes and if spending is too high it will tend to punish certain economic activities too harshly (such as corporate investment). For those reasons certain deviations from a flat rate have to be allowed for (and these can often be pretty large) but one should be wary of going too far. A complex tax system tends to give rise to a lot of unforeseen problems.

[Gustaf]

What's the Atlasian corporate tax rate? As I recall the US one is about 40%. So in order for a stockholder to get $10 he has to get $10/0.85 (going off of Badger's numbers for the medium and higher income brackets) which is equal to 11.76. Assuming a 40% corporate tax rate the corporation then must earn 11.76/0.6 which is equal to 19.6. Thus, the total amount of tax paid is nearly 50%.

This can become especially relevant for one-man companies, since the owner can then choose between paying himself a salary or paying out dividends to himself as a stockholder.

[Southern Senator North Carolina Yankee]

Without commenting for or against this bill, if I wanted to make a case for or against this bill's economic and budgetary impact I would go back to historical periods in time when we had higher marginal income tax rates (90% rates in the 50's have been mentioned thus far; the top rate was 70% for a decade until Kemp-Roth passed in 1981), and then make arguments as to what effect, if any, those higher marginal rates--as well as getting rid of them--had both on economic growth and budget revenues.

That's quite likely what the GM's office is going to do if this bill passes (amended or otherwise). As I'm not really sure right now exactly what the effects of raising top rates would be, I suggest making the case now.

As an economics student...the reason why these rates are history is not a neoliberal conspiracy like Antonio thinks, it's the fact that politicians realized they could scrap them without losing any revenue.

People with incomes on these levels already have people working for them on tax avoidance. It's a good example of a tax that is unlikely to be paid by everyone and leads to waste of resources on manipulating the tax system.

There is a reason for why no Western country today has a rate higher than about 55% or so.

Interesting. FWIW everyone here's some tables of relative tax rates worldwide (capital gains and corporate tax rates are not included, however). It's Wikipedia, so caveat emptor).

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

In what in Sweden is called "the tax reform of the century" a bipartisan deal on taxes was struck in 1990. Some of the cornerstones were cutting the highest marginal tax rate from 75% to 50%, cutting the corporate tax in half (from 56% to 28% or something like that), introducing a unified tax on all capital gains (30%), a unified VAT of around 25% and eliminating all sorts of loopholes and deductions. It didn't cause any loss in revenue and is generally hailed as a large step forward.

It should also be noted that when capital gains taxes are considered you have to remember that these often come from owning stock and then you have to take into account the "double taxation" effect coming from the fact that dividends distributed to stock holders come from corporate earnings that have already been taxed once. Also, one usually doesn't compare the highest marginal tax rate for working with the (usually) flat rate on capital gains, but rather the standard, low rate. In Sweden that would be 30% for both.

The basic economic principle is really to have a flat tax. I mean that in the sense that from the perspective of revenue raising that is probably optimal. The problem is that it isn't feasible from the perspective of income distribution, because it would be too burdensome for those with low incomes and if spending is too high it will tend to punish certain economic activities too harshly (such as corporate investment). For those reasons certain deviations from a flat rate have to be allowed for (and these can often be pretty large) but one should be wary of going too far. A complex tax system tends to give rise to a lot of unforeseen problems.

Yes. The best situation for both revenue and for growth is to be as flat as possible. While the best one for income distribution/social engineering is to have it as progressive as possible. Thus why you need a realistic balance between the two and that is what was done in Sweden and most western countries in the 1980's, 1990's and 2000's. They moved away from the economically foolish, ideologically driven tax rates of the previous era towards what is essentially a "compromise" between growth and redistribution. This bill before us, crosses the line back into those ideologically driven rates which ignores economic realism. 

What's the Atlasian corporate tax rate? As I recall the US one is about 40%. So in order for a stockholder to get $10 he has to get $10/0.85 (going off of Badger's numbers for the medium and higher income brackets) which is equal to 11.76. Assuming a 40% corporate tax rate the corporation then must earn 11.76/0.6 which is equal to 19.6. Thus, the total amount of tax paid is nearly 50%.

This can become especially relevant for one-man companies, since the owner can then choose between paying himself a salary or paying out dividends to himself as a stockholder.

This is also true. You can't look at the tax on dividends in isolation from the corporate tax.

I think the capital gains tax should be higher than that.  Maybe more like 40% for the top gain income bracket.

While that is pretty high, it is also significantly lower than the top earned income bracket which still gives the wealthy an incentive to invest.

I'd support no capital gains tax on more modest incomes or on business owners investing in their own businesses.

I would want to keep the Capital gains rate as a low as possible. My preferred option would be to maintain the current rate of 15% for those that make $250,000 a year or more and institute a 0% for those below that amount.

Considering the highest bracked is like 1,000,000 or something like that, yours would give more people 0% but on the flip side that 40% that top group is just too high.

[Southern Senator North Carolina Yankee]

And hey we lured the Swede back into Atlasian political debate, DON'T LET HIM ESCAPE!!!

[Badger]

What's the Atlasian corporate tax rate? As I recall the US one is about 40%. So in order for a stockholder to get $10 he has to get $10/0.85 (going off of Badger's numbers for the medium and higher income brackets) which is equal to 11.76. Assuming a 40% corporate tax rate the corporation then must earn 11.76/0.6 which is equal to 19.6. Thus, the total amount of tax paid is nearly 50%.

https://uselectionatlas.org/FORUM/index.php?topic=125947.msg2724841#msg2724841

[Badger]

Yes. The best situation for both revenue and for growth is to be as flat as possible. While the best one for income distribution/social engineering is to have it as progressive as possible.

<Dropping the gloves like Brent Johnson>

Okay, I'm still not taking sides in this debate, but that, Yank, is the stupidest thing I've read in a while. Maybe I'm drunk--OK, more than maybe--but kindly explain where how that piece of drek doesn't cross the line from hard-headed fiscal realism into ideological silliness.

Such a sweeping statement just makes no sense, mathematically or otherwise.

[Southern Senator North Carolina Yankee]

Yes. The best situation for both revenue and for growth is to be as flat as possible. While the best one for income distribution/social engineering is to have it as progressive as possible.

<Dropping the gloves like Brent Johnson>

Okay, I'm still not taking sides in this debate, but that, Yank, is the stupidest thing I've read in a while. Maybe I'm drunk--OK, more than maybe--but kindly explain where how that piece of drek doesn't cross the line from hard-headed fiscal realism into ideological silliness.

Such a sweeping statement just makes no sense, mathematically or otherwise.

You shouldn't drink to excess, its bad for your health.

I suggest you first sober up. Then re-examine the post again and see if you were in fact assuming an exaggerated meaning for my broad statement. If not, we can talk. If so, I doubt we will speak much again.

I am really sick and tired of this liberal tactic. It is okay to not know what someone means or to have multiple "potential meanings" in mind for what a person said, which you can then seek to get clarified. In fact I would prefer that as it is far more respectfull and far less insulting then to assume the worst and fly off the handle in a drunken rage.

In general, the lower and flatter the taxes are made, the better for growth and revenue as a result, however you have diminishing returns. Cutting from 70% to 40% has more impact then a 40% to 35%. Also, there are numerous other considerations including "stability and sustainability long term of the growth and revenue. Nobody said anything about a "flat" tax, no one said anything about top tax rates in the teens. So please put the your ideologically driven hysteria out to pasture, badger. I do suggest you also reread the third sentence which you conveniently cut out of the quote.  It calls for "balance".


And, one more thing.

"Drop the bottle."