[rqebmm]

> Say 4 of the high earners stop working as much (since their marginal rates are so high).

I know you're just using this as an example, but it begs a question I've struggled with: is there any actual proof that marginal tax rates reduce productivity in high earners?

On its face it makes perfect micro-economic sense, but that's like saying a cache will never miss or a cow is perfectly spherical. It just doesn't match up with real life experience. I've never once heard someone say "well, I'd ask for that raise, but they're going to take so much in taxes it's just not worth the effort".

Anecdotally it hasn't changed my motivations one lick as I've moved up tax brackets, to the point that I recently joked with my dad "I guess I'm done trying now!" when I stopped qualifying for a certain tax credit after I'd negotiated hard for a nice raise.

Not-so-anecdotally there's plenty of research that has shown that money (in and of itself) is a terrible motivating factor[0].

[0] https://hbr.org/2013/04/does-money-really-affect-motiv

[roenxi]

Woah there! You've basically just claimed that the laws of supply and demand don't have an impact in the labour market. That requires more evidence than finding a link between pay and intrinsic motivation/job security.

Nobody is going to turn down a flat wage hike - but the damage of government tax policy is it shrinks the window of "what the company will pay for" and "what the worker will work for". Now we can't measure this for sure, but theory tells us it is a very likely, if not practically certain, outcome. The issue is you won't see it, because companies will just not be offering some jobs because they experimented and couldn't offer them at a wage that interested workers.

As a bonus, raises are a bit of an illusion. There is a huge amount of new money entering the system from somewhere (see https://www.federalreserve.gov/releases/h6/20170406/, about 5% p.a. increase). Most wage rises in theory are to balance that out so that you have enough dollars to call on the same real resources for hours of your labour.

[Spooky23]

If your basic economic principle argument held much water, every investment banker would have moved to a lower tax locale decades ago.

The reality is that people weigh these costs against many factors and locales, clusters of business, family and institutions have powerful effects that add friction.

From a practical standpoint, the investment banker pulling in a $500k bonus in NYC with its 11.5% marginal tax rate doesn't move to New Hampshire because he'd take a 50% or more compensation haircut.

[vacri]

> I've never once heard someone say "well, I'd ask for that raise, but they're going to take so much in taxes it's just not worth the effort".

In a similar vein, nearly 10 years ago in Australia, a Mineral Rent Resource Tax (MRRT)[1] was proposed, wherein mining companies making a net profit of over 5% were taxed a bit extra on the amount over 5%. Of course the miners and their fans screamed bloody murder, and threatened to move offshore. Yeah, sure you guys are. You're going to move your profitable-by-definition business in a stable first-world country and away from working mines and supply chains.

Besides, miners mine where the minerals are; they don't move to Ireland and mine there because the taxes are low.

[1] One of the earlier names for the MRRT was the stonkingly-bad-PR move of calling it "Super Tax". It was meant to be a tax on 'super profits', but a) it sounds like an extra-powerful tax, and b) sounds like a tax on your superannuation.

[chronic940]

> I recently joked with my dad "I guess I'm done trying now!" when I stopped qualifying for a certain tax credit after I'd negotiated hard for a nice raise.

If you are still talking about tax credits, you are no where near the top tax brackets. Note that income brackets extend to more than just your reported W-2s...

[KyleJune]

Agreed, at a certain point money becomes less important. The amount of extra money the rich could make by continuing to work hard or by working harder is less of a motivational factor than it is for people in the lower and middle classes.