Tax rates over 50% - Confiscation or Justified

[mileslunn]

With Democrats talking about raising taxes on rich and talk about lifting salt cap deduction, if former done and latter not, some states could have top combined rates exceeding 50%.  Is this justified or is this confiscation in that government shouldn't take more than half of one's income?  A number of European countries albeit a minority have top rates above 50%.  So does Japan and most of Canada does (although a few provinces are just under).  I personally think except during times of war or other crisis its not justified and is confiscation.  Discuss

[TheReckoning]

I’d say it’s justified between 50-70%. Beyond that, it’s confiscation as that has no benefit on the economy and it’s just a lousy attempt at “punishing” rich people. 

[mileslunn]

I’d say it’s justified between 50-70%. Beyond that, it’s confiscation as that has no benefit on the economy and it’s just a lousy attempt at “punishing” rich people. 

Interestingly enough, today no country has top rates over 70%.  France did for a few years, but you have to go back to 80s to find any country this high.  Even 60%, no country at moment exceeds and I believe only 4 or 5 countries go above 55% at the moment.

[TheReckoning]

I’d say it’s justified between 50-70%. Beyond that, it’s confiscation as that has no benefit on the economy and it’s just a lousy attempt at “punishing” rich people. 

Interestingly enough, today no country has top rates over 70%.  France did for a few years, but you have to go back to 80s to find any country this high.  Even 60%, no country at moment exceeds and I believe only 4 or 5 countries go above 55% at the moment.

Weird to think that it was above 90% in the years after WW2.

[AGA]

I wouldn't say it's either. I don't support tax rates that high, but it isn't confiscation.

[mileslunn]

I’d say it’s justified between 50-70%. Beyond that, it’s confiscation as that has no benefit on the economy and it’s just a lousy attempt at “punishing” rich people. 

Interestingly enough, today no country has top rates over 70%.  France did for a few years, but you have to go back to 80s to find any country this high.  Even 60%, no country at moment exceeds and I believe only 4 or 5 countries go above 55% at the moment.

Weird to think that it was above 90% in the years after WW2.

US being largest economy often sets the tone so Reagan's tax cuts more or less set the tone and others at various times followed.  In 1980, most developed countries had top rates over 60%, whereas today none do.  Although to be fair only a few countries went over 90%.  UK went as high as 95%.  By contrast Germany never went above low 60s and France I believe maxed out around 2/3.  Today most developed countries have top rates between 40-55% with average in mid 40s.  For developing countries most are in 20s or 30s with only a handful over 40% (India and China exceed 40% but most don't) while over 50% only applies in around a dozen or so countries, mainly in Europe but Canada and Japan are over 50% while Israel is exactly 50%. 

[WD]

Justified completely. Ideally, the top tax rate would be about 52-55%, but I don’t believe you should go beyond that, because then you really get into the zone where you get diminishing returns for revenue and begin to adversely affect the economy.

[Mike Thick]

It depends on the bracketing structure. I don’t think there’s anything wrong with high marginal rates, though. If rates top out at 50something%, you have to be way up in there to pay even close to half your money in income tax.

[HisGrace]

A 50 percent tax on millionaires would not be unjustified until we get out fiscal house in order. Go much beyond that and you start to have problems.

[Geoffrey Howe]

I’d say it’s justified between 50-70%. Beyond that, it’s confiscation as that has no benefit on the economy and it’s just a lousy attempt at “punishing” rich people. 

Interestingly enough, today no country has top rates over 70%.  France did for a few years, but you have to go back to 80s to find any country this high.  Even 60%, no country at moment exceeds and I believe only 4 or 5 countries go above 55% at the moment.

Weird to think that it was above 90% in the years after WW2.

US being largest economy often sets the tone so Reagan's tax cuts more or less set the tone and others at various times followed.  In 1980, most developed countries had top rates over 60%, whereas today none do.  Although to be fair only a few countries went over 90%.  UK went as high as 95%.  By contrast Germany never went above low 60s and France I believe maxed out around 2/3.  Today most developed countries have top rates between 40-55% with average in mid 40s.  For developing countries most are in 20s or 30s with only a handful over 40% (India and China exceed 40% but most don't) while over 50% only applies in around a dozen or so countries, mainly in Europe but Canada and Japan are over 50% while Israel is exactly 50%. 

Well Geoffrey Howe cut them before Reagan, but simply from the very high levels of the 1970s. It was Nigel Lawson who brought them down to where they are now.

[RINO Tom]

I’d say it’s justified between 50-70%. Beyond that, it’s confiscation as that has no benefit on the economy and it’s just a lousy attempt at “punishing” rich people.  

Interestingly enough, today no country has top rates over 70%.  France did for a few years, but you have to go back to 80s to find any country this high.  Even 60%, no country at moment exceeds and I believe only 4 or 5 countries go above 55% at the moment.

Weird to think that it was above 90% in the years after WW2.

There were also a LOT more deductions and stuff, no?  So, the effective tax rate was absolutely not higher for most people, especially when you consider total tax burden.  Paying things like property tax, gas tax, plastic bag taxes at stores and things like that are not distinguishable expenses at the end of the day.

[mileslunn]

I’d say it’s justified between 50-70%. Beyond that, it’s confiscation as that has no benefit on the economy and it’s just a lousy attempt at “punishing” rich people. 

Interestingly enough, today no country has top rates over 70%.  France did for a few years, but you have to go back to 80s to find any country this high.  Even 60%, no country at moment exceeds and I believe only 4 or 5 countries go above 55% at the moment.

Weird to think that it was above 90% in the years after WW2.

US being largest economy often sets the tone so Reagan's tax cuts more or less set the tone and others at various times followed.  In 1980, most developed countries had top rates over 60%, whereas today none do.  Although to be fair only a few countries went over 90%.  UK went as high as 95%.  By contrast Germany never went above low 60s and France I believe maxed out around 2/3.  Today most developed countries have top rates between 40-55% with average in mid 40s.  For developing countries most are in 20s or 30s with only a handful over 40% (India and China exceed 40% but most don't) while over 50% only applies in around a dozen or so countries, mainly in Europe but Canada and Japan are over 50% while Israel is exactly 50%. 

Well Geoffrey Howe cut them before Reagan, but simply from the very high levels of the 1970s. It was Nigel Lawson who brought them down to where they are now.

UK did go as high as 95% which is why almost all celebrities left there and Beatles even wrote the song Taxman in response to this.  Top rate was 83% pre-Thatcher, but she dropped it to 60% upon election which for 1979 was on low side, but today no European country is that high.  It was dropped to 40% in 1988, which ironically was around same time Canada, US, Australia, and New Zealand all had tax cuts to bring top rates below 50%.  US and New Zealand were the biggest while Australia and Canada were quite modest.  In 2010 it was raised to 50%, but then coalition dropped it back to 45% in 2013 claiming that was the revenue maximizing rate.  Institute of Fiscal studies suggested 48% was revenue maximizing one.  At same time UK was still in EU then so easy for wealthy people to re-locate elsewhere in EU.  Now Ireland is only country they can freely move to and their top marginal rate is 48%, 51% if self-employed and when you include PRSI, it comes out to 52% and 55% if self-employed so now that UK has left EU possible they could go back to 50% again as Income tax + USC charges + PRSI is 52% in Ireland while Income tax + NIC if income tax at 50% would be same, although probably have enough issues this wouldn't be worth it.

I did hear though 45% was compromise as Tories wanted to drop top rate back to 40% while Liberal Democrats wanted to leave at 50% so 45% was the mid point, but who knows. 

In Canada where I live, we've had four major changes in top rates and one minor.

1972: Top rate was 80% and federal and provincial combined were linked.  After reforms provincial rates were changed to a percentage of federal and top federal rate was 47%, but when you include provincial, top rates were in low 60s which back then was on low side.  At same time there was no capital gains tax prior to this, so since a lot of wealthy earn this way, many paid nothing.

1982: Top federal rate dropped from 47% to 34% and ironically under Pierre Trudeau who was fairly left wing, but business community was outraged at this as scrapped a lot of write offs and perks.  Things like golf course membership, yachts, second homes, private jets etc, were all tax deductible.  Combined average was 64% in 1981 while in 1982 dropped to around 50% although most provinces changed their percentages so from 1982-1987 most were in low 50s like today although Manitoba which had NDP then went into high 50s.

1988: 10 brackets were collapsed into 3 and top rate dropped from 34% to 29%.  Combined top rates fell from low 50s to high 40s although early 90s recession and a number of left wing governments winning, most notably BC and Ontario meant by mid 90s most provinces were in low 50s and in fact by 1995, Alberta was only province under 50%. 

2001:  Surtax on high earners eliminated and 2000 was last year prior to 2010 any province had a top rate over 50%, but then only BC, Quebec, and Newfoundland & Labrador

2016: Trudeau raises top rate from 29% to 33%.  With many provinces also raising top rates, average increase was closer to 7% as there was a real soak the rich movement in past decade.  Prior to 2015, no province went over 50% and Nova Scotia was exactly 50%.  By 2016, it was 6 of 10 provinces over 50%.  Newfoundland in 2017 joins this club, while BC joins it in 2020 so today only Alberta, Saskatchewan, and Territories are only ones below 50% and asides Nunavut (who really wants to live there with 10 months of snow) not by much

[Kahane's Grave Is A Gender-Neutral Bathroom]

Depends. This question is phrased openly, so it really depends.

50.1% for those making over $10,000,000 per year- Justified

95% for those making over $100,000 per year- Commiefiscation

Generally I think we should just make more tax brackets- $400,000 and $40,000,000 are quite different.

55% for those making eight figures.

[○∙◄☻¥tπ[╪AV┼cVê└]

I think you pay around 50% if you're middle class and accidentally use your HSA for the wrong thing. That's confiscation. But on the rich, it's justified.

[RINO Tom]

I think you pay around 50% if you're middle class and accidentally use your HSA for the wrong thing. That's confiscation. But on the rich, it's justified.

What would you put as the cutoff for being rich?  Is that going to be tied to cost of living at all (i.e., handled more at the state or local level) or just be a blanket federal rate?

[mileslunn]

I think you pay around 50% if you're middle class and accidentally use your HSA for the wrong thing. That's confiscation. But on the rich, it's justified.

What would you put as the cutoff for being rich?  Is that going to be tied to cost of living at all (i.e., handled more at the state or local level) or just be a blanket federal rate?

This is more do you think rates in excess of 50% are justified at any income.  Obviously it could be as low as 70K if you want to be like Nordic Countries or as high as 25 million if you like New York City.  Its more a question does one think having tax rates over 50% is justified for ANYONE or NO ONE, not about where it should kick in.  Many argue it shouldn't be that high no matter what income.  If you believe it should be above a certain income, then justified.

[Pericles]

I’d say it’s justified between 50-70%. Beyond that, it’s confiscation as that has no benefit on the economy and it’s just a lousy attempt at “punishing” rich people. 

I actually agree with you here. I think a top marginal rate of about 60% would be about right since it reduces inequality and maximizes revenue but whoever is in this very high bracket still has a right to a significant part of their income and they shouldn't be disincentivised from working. It is annoying when people confuse marginal rates with the total share of income being taxed though.

[gerritcole]

Do we really need incomes if the government can truly provide everything for us?

[TiltsAreUnderrated]

It's ok to cross over the Laffer curve a bit where that can correct power imbalances and promote a healthy sort of social cohesion.

[Geoffrey Howe]

It's ok to cross over the Laffer curve a bit where that can correct power imbalances and promote a healthy sort of social cohesion.

How does crossing the Laffer curve do that?

[TiltsAreUnderrated]

It's ok to cross over the Laffer curve a bit where that can correct power imbalances and promote a healthy sort of social cohesion.

How does crossing the Laffer curve do that?

Less economic inequality is conducive to social cohesion. Crossing the laffer curve w.r.t, say,  income tax means a government might get marginally less tax revenue in one year, but the loss in revenue can sometimes be worth society being more at ease with itself.

[Geoffrey Howe]

It's ok to cross over the Laffer curve a bit where that can correct power imbalances and promote a healthy sort of social cohesion.

How does crossing the Laffer curve do that?

Less economic inequality is conducive to social cohesion. Crossing the laffer curve w.r.t, say,  income tax means a government might get marginally less tax revenue in one year, but the loss in revenue can sometimes be worth society being more at ease with itself.

How does it reduce inequality if you're not actually gathering the revenue?

[TiltsAreUnderrated]

It's ok to cross over the Laffer curve a bit where that can correct power imbalances and promote a healthy sort of social cohesion.

How does crossing the Laffer curve do that?

Less economic inequality is conducive to social cohesion. Crossing the laffer curve w.r.t, say,  income tax means a government might get marginally less tax revenue in one year, but the loss in revenue can sometimes be worth society being more at ease with itself.

How does it reduce inequality if you're not actually gathering the revenue?

By making the "overtaxed" high earners poorer than they otherwise would be. My argument is that the rich getting poorer and thus having less power relative to everyone else can be a (limited) social good in itself.

"You'll fall on the wrong side of the Laffer curve!" is a trap too many wonkish socdems fall into. Their presumption is that income taxes etc. can only be justified (rather than "confiscation") so long as they provide more revenue. I disagree.

[Geoffrey Howe]

It's ok to cross over the Laffer curve a bit where that can correct power imbalances and promote a healthy sort of social cohesion.

How does crossing the Laffer curve do that?

Less economic inequality is conducive to social cohesion. Crossing the laffer curve w.r.t, say,  income tax means a government might get marginally less tax revenue in one year, but the loss in revenue can sometimes be worth society being more at ease with itself.

How does it reduce inequality if you're not actually gathering the revenue?

By making the "overtaxed" high earners poorer than they otherwise would be. My argument is that the rich getting poorer and thus having less power relative to everyone else can be a (limited) social good in itself.

"You'll fall on the wrong side of the Laffer curve!" is a trap too many wonkish socdems fall into. Their presumption is that income taxes etc. can only be justified (rather than "confiscation") so long as they provide more revenue. I disagree.

How will they be poorer if they're not paying the tax?

[TiltsAreUnderrated]

It's ok to cross over the Laffer curve a bit where that can correct power imbalances and promote a healthy sort of social cohesion.

How does crossing the Laffer curve do that?

Less economic inequality is conducive to social cohesion. Crossing the laffer curve w.r.t, say,  income tax means a government might get marginally less tax revenue in one year, but the loss in revenue can sometimes be worth society being more at ease with itself.

How does it reduce inequality if you're not actually gathering the revenue?

By making the "overtaxed" high earners poorer than they otherwise would be. My argument is that the rich getting poorer and thus having less power relative to everyone else can be a (limited) social good in itself.

"You'll fall on the wrong side of the Laffer curve!" is a trap too many wonkish socdems fall into. Their presumption is that income taxes etc. can only be justified (rather than "confiscation") so long as they provide more revenue. I disagree.

How will they be poorer if they're not paying the tax?

Essentially, the Laffer curve means that past a certain level in taxes, total revenue decreases even as taxes rise. They are paying the higher percentage of tax, but from a pie that is smaller to begin with because higher taxation of an activity results in less of the activity happening to begin with.

For instance, a 70% income tax bracket would discourage certain employers from paying out salaries that extend into that bracket (they would know most of the money in that bracket would not go their employees).