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Old 12-16-2009, 08:20 PM   #63 (permalink)
loquitur
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Progressivity means that marginal income is taxed marginally more. It looks at the rate on each additional dollar of income.

But your point appears to be that high earners (however defined - definition is an issue, too) tend to find ways to keep their total income tax down. Yeah, they do. They do it mainly by time-shifting and because much of their income is in capital gains. If you take out the capital gains piece, I would bet that the graph would show a huge amount of progressivity by your definition. is your complaint that capital gains have differential treatment? Or is your complaint that it's not right for people to make a lot of money?

You do realize that the best way to avoid paying tax on capital gains is not to sell, don't you? Introducing illiquidity by constricting the number of sellers and buyers has consequences. You might be willing to pay those consequences, but please show that you considered any of this stuff beyond simply stamping your feet about the fact that some people are doing better than you.

---------- Post added at 04:20 AM ---------- Previous post was at 04:14 AM ----------

Oh, and I should add that increasing marginal rates at the top means (ceteris parabus) more of the tax burden gets borne there. You might like that result, but again, there are tradeoffs. And one of them is that there tends to be less income at that level. The compensation tends to get diverted to untaxed, lower-taxed or deferred-taxed activities.
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