I like how he just neatly avoided the %52 tax thing. If the tax rate for the brackets doesn't change then the guy is right. If it goes to the %52 for everyone above $29k then he's drastically wrong and the original guy is right.
Hi Lucky11. The definition of marginal tax brackets is that they do change. If you look at the red text- it explains that the proposed 52% ted would be on people making 10 MILLION dollars or more a year. The 52% isn’t what you pay if you make 10 THOUSAND dollars a year.
A simple version of marginal tax is like this:
Every dollar ANYONE makes up to let’s say for example- 20,000 dollars- you pay 10%. But- every dollar you make AFTER 20,000 you pay 20% on, until you reach 100,000 and then after that you pay... let’s say 50%. (these numbers aren’t real. The limit can be whatever number.)
So- Jane and Bill. Both make $20k this year. Both pay 10%- 2,000 tax. Next year- Jane gets a new job. She now makes $25k and Bill makes $20 still. They both pay 10% on the first 20k- $2,000. Bills taxes are paid. Jane then pays 20% on the next $5k- $1,000. So Jane pays a total of $3,000 in taxes.
Jane gets a raise to $100k and bill starts a business and makes $200k! So under our tax rules we set here- both pay 10% on the first 20k- $2,000. The tax jumps to 20% after 20k- so both pay 20% of the next 100,000- $20,000. Now both have paid $22,000. Bill isn’t done. After $100,000- Bill pays 50% on ever dollar after that. So he will pay $50k on the second hundred grand he makes. Bill would pay a total of $72,000 in tax and take home $128,000. Jane would pay $22,000 in taxes and take home $78,000. Bill still makes significantly more than Jane- but we could- if we wanted- sit down and work out the tax brackets so that if Bill makes 2x as much before tax- he can still make 2x as much after tax- that isn’t really critical however since he is still taking home much more money than Jane.
.....I have no idea why you are explaining that again and I have no idea why you didn't use Jack and Jill for your metaphorical characters. Shit, Jack and Diane makes way more sense than a Jane.
So hopefully this has explained it a bit better- that the red text in fact does refute the point on tax brackets. The alternative to this bracket system is one where the TOTAL earnings are taxed at a higher bracket. So in our example Bill took home 128,000 dollars. If we used a straight tax bracket, where once bill reached $200k he paid 50% on ALL his income- Bill would only make $100k.
An advantage to this system is that it imposes a difficulty curve- like video games. If finances were a videogame- you’d start out in a nightmare difficulty boss fight with starter gear, and as you leveled up it would become easier to get levels and the challenges would be reduced. This type of tax tries to make it easier for new and weak players- and increases the difficulty the higher level and skill a player becomes.
To put it in perspective- a high interest savings account might have about 1% interest and basically no risk. If you put $1 million dollars in that account you will make $10,000 a year for nothing. If you put $10 million in that account- you could live the rest of your life making $100k a year just off interest and still always have $10mill (or if you just put it in a safe and give yourself allowance you can spend $100k a year and use it all up... in 100 years..). If you invest $3 million wisely- you can live a middle class life for life- without work. It takes money to make money. $1,000 in that same account gets you $10 a year. A decade to make $100. The more money you have- the easier it is to make money.
This gives a HUGE advantage to those with money that those with less really can’t overcome. That’s a big source of the growing concentration of wealth amongst a small percentage of the population. But if we make it HARDER to make money the more you make- we can make sure that wealth is more spread out, and only the TRULY exceptional can achieve insane wealth.
Some argue that is anti capitalist. That it demotivates people. It does- and it doesn’t. A million dollars is still a million dollars. If I make 2 and keep one- I’d still rather have the million than not. Bet I will work to make $5 so I can keep 2.5. But really- many people can’t find jobs that pay living wages. Machines are increasingly taking even skilled jobs. The 4 day work week and “flex time” are becoming more and more common. We have made production so efficient that we have far more than we have demand- we have to CREATE demand and create jobs like middle management and other disguised unemployment because we just don’t need as many workers as workers who need jobs.
Slowing that down, incentivizing people to say “well fuck it. The extra work isn’t worth making a measly $5k take home...” is a way to free up jobs for other people. Remember- if I’m making $100k in our example- and you offer me $120k to do the work of 2 people- why would I? I’d only get a $10k raise. But- even if you make the extra work a second job and only offer $20k to do it- if that person has no job or is making $15- they’ll get a pretty big raise. If I am Disney or Amazon or one of these giant conglomerates- maybe I don’t need to swallow up all these other businesses because come tax time they are more trouble than they are worth- so instead of the Disney CEO making an extra $25k a year- a small business owner makes $60k a year.
It could also slow inflation and ease tensions in places like the housing market. As these insane amounts of money people at the tip make back off- prices back off. When you’re competing for a house against a work from home transplant techie that makes 4x the median income of your city- you’ll never be able to outbid them unless you do something stupid. But when they make only about $20k more than you- they can’t bump the prices to stratospheric levels until locals can’t afford to live in their towns.
It’s not a perfect system. Lots of things to think about and consider- loopholes to fix and accountability so that those taxes go to the actual good of the people- but... the idea is with merit- and more importantly the guy DID answer the question.
@funkmasterrex- sorry. Didn’t see your replies until now. Was typing out between work stuffs. I didn’t want to make the names too sing song or starting with the same letters since it could get confusing with all the “Jill Y Jack X” and so on. But I just pulled a couple names that seemed to work- with more thought I admit I could have accomplished to goal of mitigating confusion while being more clever.
Wow my comment spawned a long chain. @guest_ my response was not in any way taking in the tax brackets. I responded to it by taking it at face value. It didn't matter who was right because I really don't care all that much. It's highly unlikely it would get passed even if he gets elected. The guy answered True for the first two but merely went into an explanation for the rest. Now if he'd have said False, then explained that the proposed %52 is for.... that would have been completely reasonable. Is it too much to ask for some continuity in his answers?
edit: "logic"
Every dollar ANYONE makes up to let’s say for example- 20,000 dollars- you pay 10%. But- every dollar you make AFTER 20,000 you pay 20% on, until you reach 100,000 and then after that you pay... let’s say 50%. (these numbers aren’t real. The limit can be whatever number.)
math.