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by NovemberWhiskey
2212 days ago
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>Now, a top marginal tax rate of 61% is the kind that you see in Sweden, Finland, Japan, Quebec Canada, or Denmark. You are not describing a marginal tax rate though. You're describing an effective tax rate, as you acknowledge immediately above. In Japan, the top marginal rate of income tax is about 55% on taxable income over ¥40M (say $370K). Let's see how the marginal tax rate between the fourth and fifth quartiles in your example compares with that, and also look at Japan's effective tax rate around the same income levels as your highest quintile. Your fourth quintile household takes home $86,570 on an income of $101,570. With an incremental income of $132,415 above that, your highest quintile household takes home only $4,325 more. The marginal rate of taxation is therefore 96.7% Someone with an salary of $250K in Japan (call it ¥27.2M) gets a standard earned income deduction of ¥2.2M plus a personal exemption of about ¥400K. The taxable income is about ¥24.6M. National income tax will be about ¥7M. Local income tax will be about ¥2.5M. Take-home pay will be about ¥17.7M and the effective tax rate approximately 35%. |
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Doesn't change the argument, the point of the exercise is to show the absolute worst case. This math assumes:
1) 0 overlap with existing programs, which is extraordinarily unlikely. A transfer of $29,000 to a recipient of EITC/CTC and Medicaid is a pretty stupid waste of money. We would either reduce the UBI required (thereby reducing the taxes to the level I laid out in my top-most comment), or we would do away with many of the welfare programs that we already pay taxes for.
2) preservation of existing level of transfer payments to a demographic that is, on average, the richest
3) 0 other taxes. My math assumes an imaginary world in which we do not levy payroll taxes, which account for 35% of the current Federal revenue. That is a world which does not exist, and hence the income tax wouldn't have to be this high.
4) 0 distinction between adults and children — I.e should a family of 4 receive $29,000*4 == $116,000? Absolutely not, this is a comically generous UBI.
The point is that you can take the framework and play with different levels of generosity and different levels of progressivity in the tax brackets. The fundamental basis for the system doesn't change.