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  •  I agree that that is the best way to write a (0+ / 0-)

    progressive tax code, to use effective tax rates. But my point is, are you not conceding to the right their most basic premise - specifically that a progressive tax rate discourages motivation and innovation? We exist on a left/right continuum, we all agree on that, but if we moved left with a progressive effective tax rate that would bring all of our income levels to near parity, aren't you saying that our gross output would fall? That motivation would be lost? Isn't that their argument?

    •  Huh? (1+ / 0-)
      Recommended by:
      unfangus

      if we moved left with a progressive effective tax rate that would bring all of our income levels to near parity...

      No one's proposing that. In the 1950s, the top of the income scale still made way more than the bottom.

      The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts. -Bertrand Russell

      by mftalbot on Thu Apr 04, 2013 at 05:09:15 PM PDT

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    •  This is not a "yes or no" issue (1+ / 0-)
      Recommended by:
      Sparhawk
      specifically that a progressive tax rate discourages motivation and innovation
      Obviously, "a progressive tax code" does not discourage motivation and innovation if it's reasonable.  We have a very progressive federal income tax system, as demonstrated by the IRS data.  I've linked it in other comments, but as I said elsewhere, it's summarized here.  We can have a progressive tax code without dampening productivity.  

      It depends on what you mean by "a progressive tax code."  I do believe that if you get to a point where the tax burden is TOO high, people will stop producing.  Laffer is right on the extremes -- a 100% tax on incomes over $1 million will garner nothing, or very little, because then almost nobody will earn over $1 million.  No CEO would have his pay set over $1 million, no athlete would sign a contract for more than $1 million, no movie star would make more movies than it takes to garner $1 million a year.  

      That principle applies even more at lower levels, I think.  Say you have a doctor who works 2000 hours seeing patients, has 2 nurses, and makes $1 million a year.  Say you tell him, everything over $500,000 is taxed at 75%.  That means for the second 1000 hours, he takes home maybe 10% (after state taxes, Medicare taxes, etc.) of what he works for every day. At that point, that additional income is not going to make a difference in his life or in the life of his family.  So, he'd rather work 1000 hours, fire one nurse, make his $500,000, and take the 1000 hours off to spend with his family.

      I know that if someone capped -- or almost capped --  my income, I'd work as much I needed to to get to the cap, and then take the time to spend with my children and family rather than work a large number of hours for the small marginal increase in my take-home pay.  My life is a trade off of my time for money (I work by the hour).  At some point, based on a number of things including what I take home in pay for an hour's work, the time becomes more valuable to me than the money.

      So the simple fact that an income tax code is progressive does not discourage motivation, innovation, and hard work.  If it gets TOO onerous at some income level, it can do that.  The question is where to find the "sweet spot" -- high enough to raise the most revenue, without decreasing productivity, which decreases your tax revenue overall.  

      •  Here are some specific proposals (3+ / 0-)
        Recommended by:
        84thProblem, DarthMeow504, unfangus

        Here are some proven, sensible liberal ideas.

        1. Give workers a bigger voice in how profits are distributed. A great way to do that is by encouraging union membership. Let me put this bluntly: The government ought to do everything it can to encourage unionization across all economic sectors. A good start would be repealing the Taft-Hartley act, and passing the Employee Free Choice Act.

        2. Use the tax system to discourage out-sized payouts for corporate executives and banksters. This will, all by itself, discourage the obscene paychecks the One Percenters currently award themselves, and would encourage them (through deductions) to do economically beneficial things with the money.

        3. Re-regulate the financial sector. Restore and strengthen the Glass-Steagall Act. Break up the big banks to the point that the insolvency of one won’t threaten the economy. (While I’m at it: impose a retroactive tax of 100 percent on all non-salary compensation of every executive of every financial institution that received federal bailout money. It might not prevail in the ensuing litigation, but it would be amusing to watch them squirm.)

        4. Raise the minimum wage to a living wage, and tie future increases to the rate of productivity growth. This will put subtle upward pressure from below on the wages of other workers.

        The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts. -Bertrand Russell

        by mftalbot on Thu Apr 04, 2013 at 05:59:35 PM PDT

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      •  How is this a bad thing? (1+ / 0-)
        Recommended by:
        DarthMeow504
        That principle applies even more at lower levels, I think.  Say you have a doctor who works 2000 hours seeing patients, has 2 nurses, and makes $1 million a year.  Say you tell him, everything over $500,000 is taxed at 75%.  That means for the second 1000 hours, he takes home maybe 10% (after state taxes, Medicare taxes, etc.) of what he works for every day. At that point, that additional income is not going to make a difference in his life or in the life of his family.  So, he'd rather work 1000 hours, fire one nurse, make his $500,000, and take the 1000 hours off to spend with his family.
        Presumably there is a demand for someone to do that second 1000 hours of work.  So a second doctor comes along, hires the newly unemployed nurse, does their 1000 hours of work and takes home half a million bucks.  At least one more person is employed and richly rewarded, there is more choice in the market and less concentration of wealth at the top.  Two wealthy families get to spend more time with their talented bread winner.

        It's a win-win!

        -7.38, -5.38 (that's a surprise)

        Why must we struggle to protect the accomplishments of Democrats of the past from Democrats of the present? -- cal2010

        by 84thProblem on Thu Apr 04, 2013 at 09:09:44 PM PDT

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        •  In the real world the prices rise (0+ / 0-)

          In the short term if the demand is the same and the supply is reduced the prices rise and that would surely be the case in this example because there are no unemployed physicians who would step in to fill the supply side. Your point could certainly be the case in professions where there is an oversupply, like lawyers.

          "let's talk about that"

          by VClib on Sat Apr 06, 2013 at 06:38:51 AM PDT

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    •  Not if it can still get them on top. (2+ / 0-)
      Recommended by:
      84thProblem, DarthMeow504

      What the laissez-faire crowd doesn't understand is that the prospect of being on top will be enough to motivate most people, at least if "on top" is high enough.  "On top" could be a tenth as high as it is now and it'd still be a big motivator.  Would you really be less motivated to make half a billion bucks than you'd be to make five billion?  Either one is more than you could ever spend.

      The '60s were simply an attempt to get the 21st Century started early; don't mistake an unfulfilled dream for a lost one. A dream has no deadline!

      by Panurge on Thu Apr 04, 2013 at 06:19:08 PM PDT

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