Posters will now stumble over each other to assure you that tax evasion was so widespread that actually the effective tax rate was lower than Reagan's wildest dreams.
All right, then I'll ask the other question. What do you consider "fair"? You don't say it, and the GP doesn't, but the implicit assertion is that the rich don't pay their "fair share", presumably because in some mythological past they used to pay 94%.
What is then "fair"? 94% ? Do you have a formula? At least a principle. If I make $100 MM (I don't), should I pay 50%, 60%, 70%? I mean, even if I pay 99%, I still retain more than 99% of the Americans, right?
I have a formula and a principle. Anyone earning $100 MM or above should pay the same effective percentage as the median taxpayer... relative to their wealth.
The median US household has a net worth of $120k and pays about $10k in taxes each year. That equates to an 8% wealth tax.
If a billionaire has $1 MM in income one year, they could pay $2 MM in tax and not even notice, despite that being a 200% effective income tax rate. What matters, in terms of "fairness", is what that burden feels like, which is losing 0.2% of their wealth (assuming wealth of exactly $1000 MM). For the median household that would be like paying $240 in taxes.
Note that this doesn't even take into account the law of diminishing marginal returns, which states that the millionth dollar matters less to someone than their first dollar, so the millionth dollar should be taxed at a higher rate for the same hedonic burden.
I'm not sure why my comment is so objectionable, when all I did was offer a formula and principle as per the parent comment's request. I suspect that people with more than $100 MM in wealth have better things to do with their time than downvote suggestions on HN that they should pay more tax, so, in the absence of any more substantive criticism, I'll assume the objectors were people who consider themselves temporarily embarrassed millionaires.
I did not downvote you (on HN you can't downvote someone who answers your comment).
I think you proposed a reasonable option, but a bit imprecise. It's not clear if you advocate for a wealth-based tax, or some type of crossover tax, like a max between an income-based tax and a wealth-based tax. In any case, a lot of people (and especially a lot of startup oriented people, like readers of the HN forum) are against taxes on unrealized gains, which is what your proposal would end up to be.
As for the temporarily embarassed millionaire. I have a different reason to oppose taxing the wealthy. In my native country there's a saying that roughly translates "it's easy to prescribe 10 whiplashes to someone else's buttocks".
I personally find profoundly immoral to wish a category of people to suffer, when you know that you are not in that category. Now, you may say that the rich people don't "suffer" when they pay more taxes, but I don't know that. I believe in the benefit of doubt. As far as I'm concerned, if someone is rich, they deserve to enjoy the fruits of their labor, not to a lesser extent than me. I personally know lots, really lots of people who work much harder than me, and make more money than me. They have chosen to forgo or postpone gratification in life, and I chose not to. I can clamor for them to now forgo their reward, but I simply find that immoral.
> like a max between an income-based tax and a wealth-based tax.
I'm not sure if you mean "mix" or "max" but I think my answer might be yes to both. :) What I'm proposing is that the rich continue to pay an income tax like everyone else, but above a certain wealth threshold they need to be assessed for paying a wealth tax. Any amount they pay in income tax can be counted towards their wealth tax, so they don't get double-taxed and don't have to worry about paying more than the median citizen (proportionally).
> I believe in the benefit of doubt.
The best philosophical approach to this that I've found is Rawls's "veil of ignorance"[0] thought experiment. While it is difficult to completely rule out the possibility of bias when asking someone to come up with a policy that has harsher effects on people who aren't like them, I feel confident that I would be willing to trade my current place for the place of a billionaire living in the sort of society I'm proposing.
> As far as I'm concerned, if someone is rich, they deserve to enjoy the fruits of their labor, not to a lesser extent than me.
What if the rich person became rich by inheriting money, or winning the lottery, or being lucky in some other way (e.g. finding oil on their property, or being born with the looks of a supermodel, or being the first to patent an obvious idea)? Societies do try to address these issues with different policy measures, but all I am asking is that the rich "suffer" the same amount as everyone else (i.e. as the median person in their society).
Paying a given dollar amount in tax obviously feels much hard if you have close to that amount in assets, compared to if you have so much money that it's literally uncountable and you wouldn't notice if that given amount were taken from you. So I think it is the poor that we should be giving the benefit of the doubt to when they say that the current system is unfair to them.
> I personally know lots, really lots of people who work much harder than me, and make more money than me.
And I know people who work much harder than me, and make less money than me, because the market doesn't value their work in the same way as it values mine. Sadly I see more people trying to protect the status quo for idle billionaires than trying to change the system so that the hard-working poor are rewarded according to their intrinsic worth as human beings, rather than how little the rich can get away with paying them for the value extracted from them.
What's fair is a constant rate across everyone regardless of income level (once a minimum threshold is reached) as Islam does in Zakat. Without getting into too many details, it requires 2.5% of the amount of money sitting in the bank (or equivalent) for a year to be donated to certain classes of charity. It works so well that it has been reported that there were no poor people left to accept Zakat in Iraq during the Ummayad period.
Brains here clearly in overdrive trying to elicit all the vaguely possible excuses and attenuations, everything but confronting the hard fact staring them in the face on a G-damn spreadsheet.
Folks, it doesn't get more straightforward than a spreadsheet. Income tax in the US was higher in the mid-1900s than it is today in Europe.
I’m pretty sure the rationale given by current politicians for at-present proposals is that they are arranging their income to avoid taxes, and therefore they aren’t paying their “fair” share.
It’s nauseating but evasion (a legal term) and avoidance are taken as the same morally compromised position now.