In the 2004 Presidential campaign, John Kerry proposed a roughly 4% tax hike on the “rich”. His version of rich was those earning $200,000 a year. This held little appeal to the public because someday, with enough hard work, anyone could aspire to such levels. It insults our sense of fairness. This left me thinking, would we be as insulted if someone wanted to implement an income tax bracket that starts at a $1 million? Is it fair for CEO’s to make hundreds of millions of dollars while their employees scrape to get by? This is the highest form of class warfare, but it has not been uncommon in our history. Tax a very small percentage of the population to the benefit of the masses. I looked into what offsetting decreases in all income tax with a new tax bracket of 60% on dollars over $1 million earned would do for America and here is what I found:

-The restructuring would hurt less than 0.1% of Americans, and help over 50% of Americans.
-It is amazing to look at information on the incomes of the top 0.1% of Americans. The Census bureau doesn’t offer it, the IRS doesn’t clearly offer it, the public media in general does not point it out. I suspect this is because the uberwealthy have the influence to keep it hidden.
-The money collected from individual income taxes would increase 24%, or $200 billion, from this new ‘ceiling’ tax bracket. This would provide enough money to lower all other income tax brackets 10%. For example, if you are currently in the 25% tax bracket, you would now be in a 15% bracket.


Questions for debate: Would you support a politician who proposed implementing a new federal income tax bracket of 60% on dollars earned over $1 million if the proposal was revenue neutral? Would this type of tax restructuring help or hurt the US economy? Why or why not?

Suppose we re-word your question to read:

Should a majority of Americans be able to tie down and rob a small percentage of other Americans (let's say 0.1%) because it helps a greater number?

By the way, if you know anyone making "hundreds of millions" per year as a CEO, I'd like to see it.

This is the classic class warfare debate: they have it so why don't we take it from them? We outnumber them!

Questions for debate: Would you support a politician who proposed implementing a new federal income tax bracket of 60% on dollars earned over $1 million if the proposal was revenue neutral? Would this type of tax restructuring help or hurt the US economy? Why or why not?

No. Such a rate (60%) is confiscatory. I favor a flat tax with a $30,000 flat deductible. No one under $30k pays income tax, but everyone else pays the same proportional amount.

Tax rates above around 30% (in my view) are simply wrong. The government does not have a right to that amount of a person's earnings.

Ask and you shall receive Amlord. Bell top executive compensation. Dated 2002.


The question remains, and it is what it is. Class warfare has been a major part of the income tax from day 1. From a history of the US tax system:

Does that make it right? No. One could easily argue though that since the American system is what allowed you to obtain such obscene levels of wealth, that asking you to give more to support the system is not unreasonable. There is only so much money in the country, and since money = power allowing too high a concentration of money with a few people is not exactly conducive to democracy. PS - I am curious as to what you feel the economic benefits/problems would be with such a proposal.

Would you support a politician who proposed implementing a new federal income tax bracket of 60% on dollars earned over $1 million if the proposal was revenue neutral? Would this type of tax restructuring help or hurt the US economy? Why or why not?

No, I would not. I agree with Amlord in that confiscating wealth from one group to give to another is not something I can support. Further, I suspect that doing so would hurt the economy...which will likely offset any benefit gained from those who received the funds. Our economy benefits when those who make the most are encouraged to maximize their gain (consider the collective benefit Microsoft has provided to the economy and those who have worked there). In short, taxation is a disincentive to earn. Handouts are also a disincentive to earn. Why would we want to impose maximum disincentive on those making the largest contributions, and further disincent those receiving the funds from making it on their own?

My standing on this might change if evidence were offered that the net effect on the economy would be positive.....although I still would have philosophical objections, that would remove my fiscal ones. I would like some additional information on how the following calculations were made...the table provided doesn't make this obvious:





One could also argue that those using the majority of the tax expenditures be required to repay the system for the benefits received...there are value arguments that work both ways. There is a fundamental assumption made in your argument that needs to be proven, however....is it the 'system' that allowed those riches to be accumulated, or that person's effort? If it is indeed the system...what is preventing everyone else from achieving? Did Bill Gates get to where he is because of the system? Or because of his skill at creating and promoting a product? Further...didn't thousands and thousands of people directly benefit from this skill by working at Microsoft? How exactly would they benefit from disincenting Bill to create such wealth?

Holy God no. If you're giving 60% of your money to Uncle Sam [and by proxy, some people you don't know] you're essentially working for the government. I think 30% is ridiculous enough. In addition, a 60% tax for the rich for the purpose of redistribution is essentially socialism, and we can debate socialism vs. capitalism all day. The point remains though, that a 60% tax on the "rich" would qualify as socialism, IMHO.

CP

"There is only so much money in the country" ??? Are you aware that our economy grows every single quarter? What causes our economy to growis risk-taking and other effort, which is exactly the kind of activity spurred by lower tax rates.

I for one won't be hauling my butt out of bed to run a business if the incremental earnings on that business were taxed at 60%. 60% of zero is a whole lot less than 20% of $100 million. Do you really think that Kobe Bryant's agent would work as hard to negotiate his contract if the government was going to confiscate 60% of it? The example of your $200 billion assumes that people will behave exactly the same, which of course they won't. You think that outsourcing is a problem now, wait until you see the small businesses moving to the Caymans in your 60% scenario.

The only reason we're (again) hearing about "the rich getting richer" is that the economy is now growing so much that even the most liberal doomsayers can no longer deny it. Therefore, it's time to drag out the polarization argument.

recession = hurts the poor
economic growth = rich getting richer

There is no economic state in this country which can make some people happy.

Would you support a politician who proposed implementing a new federal income tax bracket of 60% on dollars earned over $1 million if the proposal was revenue neutral?
Nobody is more mobile than a rich person. If you rely on rich people to fund the government, then you run into a problem when they move out of the country to avoid the taxes. The socialist response would be to prevent them from moving away. Sounds good on paper, but it didn't work so well with East Germany. Remember the wall?

The irony is that government gets all of its money from businesses and individuals, and then turns around and slaps them with higher taxes. They're biting the hand that feeds them!

Would this type of tax restructuring help or hurt the US economy? Why or why not?
Hurt. Like I mentioned above, if you drive the rich out of our country, they'll take their money, taxes, and jobs with them. It would be a huge loss.

Last I heard, the rich were getting richer and the poor were getting richer as well (granted this was a few years ago before illegal immigration was the problem it is today). As long as this trend continues we are on the right path.

I expected this type of response. Let me preface my response by saying that I cannot stand the income tax. If the 16th amendment were in front of me right now I would set it on fire. You are not going to eliminate income tax overnight though ladies and gentlemen. You can’t push a bolder back on top of a hill until you stop it going downhill and push it half way back up the hill. The income tax started as a tax on the top 1%. What better politically feasible way to get a flat tax or eliminate income tax completely than to have it revert back to its original state? Baby steps. The ends justify the means on this one.


Taxation is a disincentive to earn. I agree. We’re talking about discouraging 200,000 people though(details on the numbers below), while motivating over 500 times that many people. Remember, this is a revenue neutral proposal. A tax cut is not a handout Hobbes. All that we are doing is making it easier for everyone else to work their way to the level of the top 0.1% of Americans. You don’t think that the rest of the 300 million people in this country will work harder if they get the opportunity to keep more of what they earn?

We can probably name 1000 of the 200,000 people that this new tax bracket would affect. Are we really demotivating all of these people with the tax hike? Terrell Owens doesn’t care that he’s making $4 million or $6 million. All he cares about is that he is earning more than Randy Moss, Bret Farve, or anyone else in the NFL. When you get to these levels of $$, it’s all just a little competition between the 200,000 people who earn a million or more a year. As long as you have more than the other guy, you’re happy. At that level of income, you kind of lose your edge IMO.


People didn’t leave the country in the past when rates were much higher than 60%, and few would today. Where would they go? Europe? You think that the Caymans are a ‘safe’ place to have your money? Where was the mass exodus of rich from Europe when they became more socialist? Bottom line, it hasn’t happened in other places in time or on other continents and it wouldn’t happen this time. You stay close to your customer in small business(and exactly how ‘small’ is your business if your income is over a $1 million a year?). You have to.

The statistics are not clear. I cannot find 2004 individual income tax data on this sector of the populace(I wonder why?). My calculations are rough estimates but here goes.
The federal income tax received from individual income taxes in 2004 was $809 billion. Assuming an average income of $5 million(fair estimate since Bill Gates alone earns over 1000 times that much a year) on the top 200,000 tax returns, this tax creates $200 billion in tax revenue(calculated: (5million-1million)*(60%-35%)*200,000). This is an increase of revenue of 24%. It may be more, it may be less. The principle is the same here. Tax a very small percentage(less than 0.1%) to lower the taxes on the rest of the population. It’s complete class warfare, but at this extreme – it makes sense.

And to answer your Bill Gates example, it's both(plus the fact that Bill's daddy gave him a lot of startup capital). If Bill Gates were in Cuba, we wouldn't know him. If Bill Gates was not innovative and a hard worker, we wouldn't know him.


You’re right, as the economy grows, so does the money. That’s what makes this idea great. You can’t demotivate people at the top of the food chain here. Is Albert Pujols going to quit baseball? Is Adam Sandler going to stop acting? Is someone going to turn down a CEO position? Their values to society will not diminish. On the other hand you can motivate the millions of people in the middle class. Second jobs and overtime might now seem worth it to most, but if you increase the payoff some will take on the extra work.

In principle, I’m with you guys. But you know what? Politicians are completely Machiavellian. Why shouldn’t we be?

Class mobility has decreased in this country over the past 40 years. So people who believe that we should tax the rich less because they themselves might be affected by this someday are, in general, incorrect.

The same thing goes for the estate tax.

Rich people get more value from society that poor people. For example, a policeman patrolling in front of a rich persons house is providing theft insurance. Since the rich person has more valuables this insurance would cost more if it were a private service rather than a public one.

Similar arguments can be made for things like highways and air travel. If a person saves an hour on an improved highway and they earn $500 per hour then they are getting an indirect $500 benefit. The person in the next car over also saves an hour but earns only $10 and thus gets a $10 benefit.
So there is an economic argument to made for the rich paying more, even if you don't believe in a moral one. I'm deliberately avoiding the question of what "more" means. However, the founders of this country did not believe in an inherited wealth class and spoke against it. The rise of a permanent wealth class is a 20th Century development. See Kevin Philips for a traditional conservative take on this.

The US has only had a policy of wealth reallocation after the period of the Robber Barrons. There was a general improvement of the wealth of the lower classes during this period. But, in most periods there has not been much clamor for this course of action. Apparently the Horatio Alger myth still survives.

It's interesting to compare the US to other industrialized countries where the balance of incomes is not as extreme. They tend to have better social services, less poverty and populations that seem as contented as anywhere else. Even in places like Sweden with tax rates as high as 50% there is no strong popular discontent.

And in spite of beliefs to the contrary, excessive wealth concentration does have negative affects on society. A little investigating, with an open mind, will reveal lots of studies on this.

Perhaps, someday, I'll understand why Libertarians support a philosophical position which doesn't provide them with any actual economic benefit.

You don't think that people migrate because of financial reasons? Last election there was all kinds of belly aching from the left about businesses and jobs being outsourced and going overseas. I remember John Kerry proposing to stop the outsourcing by forcing people and businesses to stay (Berlin Wall idea again). Okay, so maybe taxing the rich just causes higher unemployment.

This paper by the National Bureau of Economic Research concludes that rich people move to different states when taxes go up in their respective states. It says that the negative impact on taxing the rich is modestly significant because of migratory reasons. Why can't this happen at the national level?

Questions for debate: Would you support a politician who proposed implementing a new federal income tax bracket of 60% on dollars earned over $1 million if the proposal was revenue neutral? Would this type of tax restructuring help or hurt the US economy? Why or why not?

This is the kind of question that really makes a great argument for the flat-taxers. Why do you think the 200,000 poeple or less in this country are so against this type of idea? Because those 200,000 don't pay even 10% of thier net increase, much less the 20% of the middle class citizen does

I am on both sides of this issue personally- I really see both sides of the argument here from personal experiance- I want to be a multi-millionare, and work very hard at it every day LOL- BUT- as I earn more money, I pay less and less of my ACTUAL increase, because I am able to afford tax shelters and tax avoidence measures.

I doubt that Bill Gates pays even 1% of his actual income in taxes- because he is able to succesfully hide his income.

Now- if you made a flat tax for these uber-millionares/billionares- and based it on the increase in yearly net worth- they would be paying thier fair share- which, they do not at this time.

I don't want to join the debate on taxation, but do want to contribute information on the US money supply. We have three, M1 M2 and M3.

M1 is currency.

M2 is made up of credit and deposits (stores of money). A person might have a million bucks in bank deposits, but only 20% of that has to be kept in reserve. The rest can go out into loans.

M3 is near money, or a measure of intrinsic value for things that can be used like money. For example, a person might swap a car for a boat, or a corporation might buy a company with stock.

All three are limited, although all three can grow or shrink. At any one point in time, only so much money exists in the economy.

Here's a pretty good overview:

US Money Supply

The next time someone tells you that money is unlimited, nip that notion in the bud. Money always has limits, and that's just the nature of things -- otherwise, money has no value.

Carry on, nobody likes taxes or death.

I think it is also helpful to point out- back on the conservative side of this debate- that there is a hidden type tax where goverment , well, forces you to spend money in a certain area instead of taking the tax directly. Like I said, as you get more rich, you have more tax shelters- and these are an indirect taxation IMO- for instance, I am selling a 1m dollar building- and I make a 500k profit- which I would have to pay an income tax on- which is fair, after all, it is income- BUT- I can get around this by doing a 1031 and basically buy another building. So, instead of directly taxing me for my income, they force me to re-invest my money in an area that they wish me too- I can't simply avoid the income tax by investing, in say, the stock market.

So, in a way, all tax shelters are a type of tax that forces you to spend money in an area you may not normally choose to spend it.

Would you support a politician who proposed implementing a new federal income tax bracket of 60% on dollars earned over $1 million if the proposal was revenue neutral? Would this type of tax restructuring help or hurt the US economy? Why or why not?

In short No.

My first problem with these ideas is that it implies that the wealthy in America do not pay their share of taxes. Admittedly, the wealthy can afford the high end lawyers to reduce their tax burden, but our current system is percentage based, so those with more money already pay more in taxes.

I have looked at various new tax ideas. I very much wanted to support the national sales tax approach (mostly because it would collect taxes on all the Illegal incomes, as well as the legal ones). I felt that the sudden increase in take home pay would reduce the potential cost in sales to nearly nil. However, the regressive nature of this sort of tax (meaning that a much larger percentage of the working poor's wages go to consumables then the wealthier American's) has never been addressed well, so I can not support it.

I like AmLord's idea alot. A flat tax rate on all income earned over 30,000.00 being it would be a flat tax, no tax filings would be needed, so we could simply start taking the taxes from people's incomes (similar to what we do with withholding now) as they cross the $30,000.00 line each year. The elimination of joint filing would end the penalty we currently impose on those who are single. Also, those households with two incomes would effectively have a $60,000.00 exemption as there would be a $30,000.00 exemption on each wage-earner. Everyone gets the same deduction period. (Thought: Why continue a deduction for each child when we have to face the reality there this is a growing population problem in the world?)

With no other deductions we would not have the wealthy being able to use high priced tax lawyers to reduce their tax burden. Since it would come directly from incomes made in America, there would be no need for offshore tax shelters and the like because you would now truly pay the tax at the same moment that you get the income. As a result I think this would also result in a larger amount of domestic investment which would be good for the country as a whole.

The only issue that remains is how we choose to handle benefits. We should continue to treat retirement savings (401k), medical plans and the like as pre-tax expenses. But we should change a few things.

For example, currently, as I understand it, there is a maximum allowable contribution to a 401k that is a percentage of your income (18%??). Why? I can go with a maximum contribution (let's say $100,000.00 a year (if you want to save more you can do so though other savings vehicles with post-tax money)). But, having this limit be percentage based only benefits the wealthy in that they have the ability to put far more dollars into their 401k then lower income Americans (even with this limit they would still be able to save more because they would have more income from which to save but at least we would now have the ability to save as much as we could). If I am able to keep my expenses down, why should I not be able to put 50% of my income or even more into my retirement future?

Also, when it comes to retirement plans, pensions, and the like, I feel we would best promote such savings if we treated that money as tax-free for the individual after they reach retirement age. They did their bit for the country, being productive throughout their career. They wisely saved for their retirement and as a result they are not a burden on our society. We should not tax the money they saved when they start using it to support their retirement because if they had not saved we would be paying to support their retirement IMHO.

On balance, I also have an issue with the maximum "contribution" limit when it comes to payroll taxes. We should eliminate the limits on how much someone can pay into social security. Social Security is NOT a personal savings plan, it is a tax, used to fund the payments to current recipients. Why would we set a maximum amount someone can pay into it each year? Futhermore, social security should be means tested. The likes of Bill Gates will not need a social security check, and eliminating the taxes on retirement money used after retirement age would be a pretty fair trade off IMHO.

Another problem I have with these sorts of approaches is the disincentive they create. The problem with creating higher percentage tax rates for higher incomes is that in creates a disincentive to be more productive. For example, if you are a skilled hourly worker, who has the option to work overtime, You are less likely to accept that overtime if you know that 10 hours of overtime a week will result in you jumping up a tax bracket and will result it a higher tax burden that can, in some causes, result in you actually making less money then if you just worked your 40 hours (this is something my Father had to micro-manage every year as a maintenance Electrician in the auto industry). This problem would be completely eliminated by a flat tax.

To me, a flat tax is the ultimate in fairness. If a flat tax was 20%, and I make 40,000.00 that year I paid $2,000.00 in taxes (20% of the $10000.00 I made over the initial $30,000.00). If I made $400,000.00 I pay $74,000.00 in taxes (20% of the $370,000.00 I made over the initial $30,000.00). If I made 4 million I pay $794,000.00 in taxes (20% of the $3,970,000.00 I made over the initial $30,000.00). What is unfair about this? How is it that a system like this would not be good for everyone? Everyone pays their share based on their level of success and the worst off among us pay nothing (at least on the Federal level), and there is no disincentive to be productive because if you do have an option to make $32,000.00 this year instead of $30,000.00 your tax burden would be $400.00 leaving you with an income increase of $1600.00 because the tax ONLY applies to the money made over the initial $30,000.00.

Seems like a real solution to me. Then we could take the 95% of the IRS employees we would no longer need working on taxes and put their auditing skills to work on the spending of the government. I would imagine that this sudden increase in spending oversite could result in a fair sized reduction in federal spending over time.

Actually, the reason I agree with the flat tax is that the wealthy, those that have a net increase of over a million dollars a year or more- DO NOT pay thier fair share of taxes- they pay considerably less in percentage than any US citizen except those so destitute they pay none at all.

There is also some perception that corporate taxes "come from just the corporations" - when, that amount is just passed on to the consumer- so, in reality, the consumer gets taxed again.

I ahve renters that have said "well, I don't pay property taxes, so what do I care if property taxes go up?" - and my response is "because, even if you are in the middle of a one year lease, if taxes go up, in four months, according to AK state law- I get to raise your rent"- I don't pay property tax on my rentals, my tenents do.

I like the flat tax as well. Until I get bloody filthy rich. Then I want the system to stay status quo.

Would you support a politician who proposed implementing a new federal income tax bracket of 60% on dollars earned over $1 million if the proposal was revenue neutral?

That would significantly turn the economy more toward semi socialism, and I think it would only be worth doing that, if the money went towards a dramatic increase in social services. (Tax relief is fine and good, but if your not making much money to begin with, then your still poor)

Also, implementing your idea would lead to some ackward situations. For example: One guy who is making a million dollars, is actually making less then some guy who is making 500,000 dollars, because after taxes the million dollar guy is only keeping 400,000. Somebody would have to make bit less then 3 million, before they would finnaly be keeping more money then they would have, if they made 900,000. In order to prevent this, tax ascension would have to start before you get a million (and once you get a million, it would stop going up). This in turn means it will end up hurting more then just the superich. Alternatively you could also start tax ascension at a million, but then you'd have less then your aformentioned increased revenue.

Would this type of tax restructuring help or hurt the US economy? Why or why not?

Well, your layman consumer would have a bit more spending power, but the people who run business will have a lot less. It is possible for good economys to exist in 60% taxation rates (as can be seen from countries like Canada), but nonetheless things will slow down a bit.

Basically, things will become more expensive, because in order for a big business to make a profit, it will have to sell products for over 160% the amount of money to took to create them On the otherhand, maybe this will be a good franchise buster.

As much as I despise the disparity of super salaries for athletes, CEO's, and entertainers versus those of the common folk, a 60% bracket is just repugnant on its face. This constitutes a government taking of socialist proportions and simply wouldn't get support from many folks at all.

Frankly, I'd be more in favor of a consumption tax than a flat tax. A flat tax is still regressive for those that are just over the bubble in the deduction bracket. Though I'd be inclined to give those under 30k a year an exemption to the consumption tax as well.

Doc

I didn't say that people don't migrate for financial reasons. I said that the rich haven't left the country in the past when subjected to worse situations. People could move. Few would though. Actors work in Hollywood. Athletes have to play in the States. CEO's work at corporate headquarters.
Also keep in mind this would only effect $'s earned over one million. The first million is going to be taxed at a lower rate, making it less likely that a small business owner is going to move away from his/her customer base.

Remember there are two sides of this equation. Lowering the income tax across the board except for the top 0.1% has basically all of the benefits that everyone argues for when there is a tax cut.

The fact that this topic is even being seriously discussed makes me want to cry. Has it really come to this? Do we really have no respect for liberty and property?

Human history has been a sad saga of the strong oppressing the weak. Some people have been oppressed by ruthless despots, others by the aristocracy of a tyrannical monarch. After thousands of years of the weak being enslaved by the powerful, we finally succeeded in developing republican governments in which the coercive power of the government was controlled by a voting majority.

This certainly went a long way toward limiting the oppressive power of the ruling entity because the nature of the republican form of government ensures that at least the majority are not oppressing themselves. But representative government is only a big step toward the alleviation of oppression by the powerful. The possibility still remains that the majority will oppress minority groups.

This was a problem foreseen by the authors of our Constitution and they took great pains to guard against it. That's why we ended up with three separate branches of government and a bicameral legislature to maintain a balance of power.

In the end, though, no cleverly designed constitution or independent judiciary can thwart the will of a majority that is bent on oppression. Constitutions can always be amended and Supreme Court Justices can always be slowly replaced. So, in the long run, even a government that has been carefully designed to protect minority groups from an oppressive majority must eventually submit to the will of the majority.

In such a case there is no other (non-violent) recourse for the minority but an appeal to human decency. The oppressed minorities must simply plea to the majority for mercy and hope that they will be spared.

Does the majority have the power to single out a small group of people and steal their money? Of course they do. The majority can do whatever they want in a republic (given enough time). Does this power remove the burden of asking whether or not the action is morally justified? Of course not. Some will argue that the will of the majority needs no moral justification, attributing some kind of moral authority to representative government. But it must be acknowledged that representative government, while better than every other form, is not perfect. It ultimately relies on the the decency of majority to prevent gross abuses of power.

If the richest 200,000 people obtained their money by theft or fraud or violent coercion, they should certainly be tried and sentenced and have their wealth confiscated. If anyone feels that they have been wronged by any of these 200,000 richest people, they should bring their cases before the courts. And if the courts are corrupt and owned by the wealthy, then we should be able to use our majority power to fix the problem.

But surely we can all agree that theft is immoral, can't we? Even if the theft is in the best interest of the majority?

I certainly understand the argument that the rich benefit more than the poor do from government services. That's a good argument for taxing people a percentage of their income rather than taxing everyone an equal dollar amount, but it can't justify an confiscatory, progressive tax rate levied specifically on a very small group of people.

It's difficult to think of people with million dollar incomes as an oppressed minority, but isn't that the exact reason why they were chosen for this proposal? If we were to apply a confiscatory tax rate to people earning over $100,000, there would be a huge public outcry. But no one has much sympathy for millionaires; we could easily ignore their squeals and take their money with few negative consequences, and the rich folks couldn't do a thing about it.

Of course we COULD take their money, so I can only make an appeal to human decency:

Please, do not steal.

Ok, I admit it, I am a socialist European and not a taxophobe. So this will colour all of my responses.

Would you support a politician who proposed implementing a new federal income tax bracket of 60% on dollars earned over $1 million if the proposal was revenue neutral?
In principle, I'm not over-enamoured of any tax rate above 50%. When you get to the point where more than half of what you earn goes to government, something is wrong.
However, I have no problem at all with taxing people who earn more than enough to live very comfortably indeed being taxed at about this 50% level - in practice, that's about the upper level in the UK (taking national insurance and income tax together), and I can honestly say that I aspire to be a higher rate tax payer over here. Because it means I'll be earning lots of money anyway.

Think of the Maslow heirarchy of needs, so beloved of psychologists and marketers.
If I earn exactly $1,000,000 and I pay 30% tax, I take home $700,000 in pocket change each year. That's about $233 dollars an hour, assuming a 60 hour week and 50 week working year. (These wouldn't be unreasonable assumptions, I take it, although I realise I'm ignoring state taxes?)
Now, I can see how the argument that a high marginal rate of tax is a disincentive to working that little bit harder to bump myself up into the higher tax bracket when it makes the difference between being able to feed my family or keep a roof over our heads. But when I've got $700,000 to play with, surely my motivating factors are now all to do with self-actualisation. At this level, I'm not going to work because I need the money - I'm doing it because I want to. I am way beyond the point where I can seriously justify to anyone that I need to be paid that much on personal merit alone - it becomes purely a market calculation of relative worth.
A million-dollar salary is only worth paying because it attracts the appropriate calibre of person, surely? Someone who is going to put in the necessary effort to get the job done for reasons of personal pride and professional excellence. Are such people so fragile that their need for self actualisation is gogin to suddenly revert to simple survivial mechanisms in the face of an extra 20 or 30 cents on the dollar for their take home pay above the $700,000 that's already safely in the bank?
I think that the only people at that level who are going to object to this sort of proposal are going to do it for political reasons - because they dislike taxation per se rather than the rate at which they are taxed - not because they need the money, or because they think it is a disincentive for them to work harder.

Would this type of tax restructuring help or hurt the US economy?
Well, if it were "revenue neutral" preumably this would mean that there would be tax cuts to the same value elsewhere in the income scale. The "disincentive to earn" argument might then apply at the margins - maybe people earning between $900,000 and $1,100,000 might think twice about putting in for that promotion, or what-have-you.
But then, at these levels, we aren't really talking about middle managers, are we? Mostly, we're talking about board directors, and much of the money they are getting that might tip them over the tax brackets is coming not from salary but from stock options.
What's the downside of a board opting not to pay itself so much money? Um, well, it means that same money can be given to existing stockholders as increased dividends, it can be paid out to staff, or - heck, let's be adventurous - it could even be reinvested in the business so it continues to grow. How would any of these things be worse than paying it to board directors as "perdormance bonuses" even though the company is in big trouble, or to the government as taxes?
In the wider context, I don't know how this might affect the economy, but I don't really see the point of doing it if it's going to be revenue neutral. Surely the only point of increasing taxes is to fund increased public spending?
Economically this has long been a Keynesian favourite, and (depending on where and how it is spent) this can be a good thing for the economy.
However, nobody yet has considered whether or not it might just be a good thing for American society. Again, depending on where the money gets spent, and how, (let's say on more funding for schools and universities) this could be a very good thing in the long run for America, both socially AND economically.
Even if you just paid off your government defecit, and you readjusted tax rates back down again when that was paid off, it might be a worthwhile exercise, since tax revenues after the defecit had gone could all go to useful programs, rather than disappear from view as interest payments sent abroad.

Why or why not?
Because I do not believe that social mobolity has anything to do with tax rates and is largely a myth perpetuated by the rich elites to keep themselves rich and an elite, because I am not instinctively opposed to the idea that governments can do good things with public money, and, more pithily, because I am not instincitively mistrustful of governments in the first place.
I think this, more than any great willingness for self-sacrifice or economic self-shackling, is the main political difference between Americans and Europeans, and is the main reason why most Americans are far less happy about the idea of income tax than most Europeans. That and the idea that personal property is absolutely sacrosanct no matter what the possible paybacks might be (which also informs much of the opposition of Americans to higher taxes).
Like the elevation of gun ownership to a matter of high principle, this is one of the things I just do not "get" about America.

I think that it would be good to raise taxes on the super-rich, although maybe 60% is too high. I think maybe even 2 more tax brackets might be a good idea though. I would not give it as tax breaks to the middle class, what is the point in that? I would use it to fund basic necessities for the third world poor, and programs to help the poor help themselves in this country and in the third world.

I think many of the practical points I would like to make have been made. The biggest one is that the super-rich do not work less if they make a little less, whereas the poor will be much more productive if they are given the tools to succeed. Philosophically, though, the points have not been discussed much. I want to address Reepicheep's post to do so.



First of all, anyone who supports taxation supports theft. Many people are forced to pay money to support things which they do not use, and some might even be morally opposed to what they are supporting. Pacifists, for example, are forced to pay for wars. It is unavoidable; if we let pacifists pay lower taxes, everyone would become a pacifist. The same goes for respect for liberty and property - taxation is a violation of some liberty and a confiscation of some property in order to further more important goals.

So the question is really this: How much taxation (theft) is morally acceptable? In my opinion, taxing the rich to help those better off, as long as the money is spent to effectively mitigate poverty and remove people from poverty, is always acceptable. How hurt is a rich person if we take 25%, even 50% of his income away? Not that much. He might get annoyed, he might have to get a smaller swimming pool, etc. How much will children dying of malnourishment in East Africa benefit from proper nutrition? Much, much more.

OLS, which is of greater concern to you: that the better off pay a higher percentage of their income in taxes or that the less well off are hurt by taxes? In the foreseeable future, someone is going to get taxed. Is it better to tax the top 0.1% of Americans or the next 50% of Americans? You speak of the regressive nature of the national sales tax solution and yet you endorse the flat tax which would be just as regressive, except to the middle class. Is that not accurate?


In general I agree. This argument is exactly why you should support this if proposed. Remember that this is a revenue neutral proposal. Taxes are lowered on every tax payer except the top 0.1% of earners(none of which are skilled hourly workers). This lower tax encourages us to take that overtime. And Julian and I have already addressed how the top 0.1% of earners cannot be discouraged from working. Albert Pujols is not going to stop playing baseball, or ask for a pay cut. Neither will the other 480 MLB players earning over $1.5 million a year. Nor the 400 NFL players earning that much. Nor the 200 NBA players. Nor the Hollywood actors. Nor the CEOs. Who is going to leave those jobs? What they might do is something that America’s poor sorely needs. Instead of paying the high tax rate on the money earned over $1 million dollars, they might decide to be good public citizens and start nonprofit organizations with the money. I know that I would if faced with this situation. I would work on US energy independence. Turnea would probably feed the poor in Africa. And the private citizens have consistently shown that they are more effective with the money than Uncle Sam. Look at what Bill Clinton has done with $100 million in getting AIDs medicine to Africans? More than the governments $3 billion in aid. If private citizens begin to take care of the problems of the world, perhaps the government would quit trying to fix things that they have no business being involved in.


Why wouldn’t the average worker support this? Their taxes will decrease if they do. Why wouldn’t you support this bill if proposed? The benefits would be equivalent to Bush’s 2001 $1.1 trillion tax cuts over ten years. The economy would grow because everyone is given more incentive to work.

You're making several blankets statements here about the effects of taxation on various wage classes, but offer no evidence to support these statements. How do you know the benefits would be equivalent to Bush's tax cuts? How do you know the economy would grow? This is making an inherent assumption that additional money given provided to middle and low income people will generate more economic good than the same amount of money given to corporations and wealthy individuals. Do you have any evidence this is the case?

Consider the following, from The elasticity of taxable income: evidence and implications.

While the authors do indicate that lower income brackets have higher elasticity, they ooint out that this is likely impacted by access to tax shelters, and conclude:

.

Further, Goolsbee concludes in EVIDENCE ON THE HIGH-INCOME LAFFER CURVE FROM SIX DECADES OF TAX REFORM that :



In essence, he demonstrates that only very large tax shifts have much, if any, impact on income elasticity. Applied to the situation in question here, it is unlikely that the proposed tax shift would have any effect on incomes...therefore there is likely to be no economic growth due to the shift.

Maybe not everyone is into stealing the wealthy's money.

Did you know that the top 1% of income earners pay 33% of the total federal taxes already?

Did you know that the top 10% of income earners pay 65.3% of all federal income taxes?

Did you know that the bottom 40% pay a total of -1.8% of the total federal taxes (that's right, the bottom 40%, as a group, receive more money in tax rebates than they pay in taxes).

Did you know the bottom 60% pay a total of 3.8% of federal income taxes?

CBO Report

Do you still think that the wealthiest among us do not pay their fair share?

This comparison is even more striking if you then examine the expenditures made by the government, and see where they go. The majority of money flows out to those who are putting the least in (tax breaks are NOT an expenditure by the government, so don't go there). The argument for progressive taxation is based on the assumption that everyone benefits from government expenditures in a ratio roughly in line with their income. At the very least, I think it is safe to say that that assumption is open to question. Wouldn't it be 'fair' to say that everyone needed to contribute an equal amount, regardless of income? Does someone who makes, say $100,000/yr really receive about 10 times the benefit from the government as someone who makes, say, $25,000? Or do they receive rougly the same benefit, or, in actuality, do those at the lower end of the income scale frequently receive more benefits than those above? I know taxing in this manner is simply not practical, and am not arguing that it should be done...but I do think everyone should stop and think about it for a minute before taking any stance that the rich don't pay enough in taxes, when the financial evidence shows just the opposite. It really cannot be argued that the government is set up to function essentially as forced charity. You can argue whether this is a good thing or not, but, IMHO, it is inarguable that that is indeed what it is. Which is something I think everyone should bear in mind when discussing how much those in the upper brackets should be required to pay in income taxes.

$1.1 trillion over 10 years is about $110 billion dollars in tax reduction a year right? Of course, in actuality it’s more like $80 billion the first year, $89 billion the second, and so on. This tax would generate at least that much money to be used to lower everyone else’s taxes in the same manner as the Bush tax cuts.

The evidence for the economic benefits of this proposal are found inherently in the disincentive/incentive policies of Adam Smith and from the history of previous tax cuts. People will work more if tax barriers are lowered. This proposal would motivate over 100,000,000 Americans. I think we can agree on this part. Do I have evidence that 100 million upper, upper middle, middle, and lower middle class individuals would generate more economic growth than the 200,000 most wealthy individuals? I’ve named over 1000 of the most wealthy individuals and can say without a doubt that their values to society will not change. They will not work harder or less hard than they do today. Your own study provides evidence that middle and upper middle income earners are reactive to tax incentives. I’m not proposing to increase the highest tax bracket’s percentage. I’m proposing to create an entirely new highest tax bracket, while lowing every other tax bracket’s percentage(including the current highest tax bracket).


While I appreciate the study, it has nothing to do with the increased taxes of this proposal. From your source:



Very large is pretty relative Hobbes. Bush’s 2001 tax cuts dropped all income tax brackets about 5%. This has helped to encourage the economic growth that we have seen recently and has increased tax revenues. This proposal would create the revenue to enable us to do the same thing all over again. Bush’s 2001 tax cuts were apparently large enough to have an impact. Why wouldn’t these cuts be too?


No need to get snippy Amlord. I am fully aware that the rich pay more taxes today than the poor. Do I think that the wealthiest 0.1% don’t pay their fair share? I think we all pay too much in income taxes. I don’t believe there even should be federal income taxes. If John McCain and Hillary Clinton co-wrote this bill and put it before the Senate, I would support it though. Is it fair? No. Is it good for America? Yes it is.

You mean the 100,000,000 Americans that pay a negative effective tax rate? 45,000,000 households (not people) effectively get paid each year instead of paying federal income taxes. That is over 100,000,000 million people.



I am not getting snippy. What you are advocating is for a gang of 999 people to gang up on 1 guy and take more of his stuff. That is your 0.1%. Of course the 999 people will benefit from doing this, but is it right? If you could demonstrate how this one guy (paying a marginal tax rate of 31% in 2005 compared with negative amounts to those you want to "help") receives a disproportional amount back in government services, I'd like to see that justification. It's out-and-out theft at that point.

I think that I am not being clear on the 100 million number. There are about 300 million people in the US. About half of them actually pay federal income taxes. This proposal would reduce the tax burden on that entire half, minus the 200k at the top. That is what I am speaking of with the over 100 million people helped by this. As for the 45 million households getting money from the government in excess of what they earn, this proposal would have no effect. Amlord, I would be happy to argue on your side in the elimination of this tax welfare in another debate.

I can't demonstrate that Mrs. Millionaire receives more from government services any more than you can show that I receive more than you from government services. The income tax system is NOT fair. I think we can agree on this. Was it fair for Bush to lower the 28% tax bracket to 25% when he lowered the 39.6% to 35% or part of the 15% bracket to 10%? Why only 3% here and 5% there? Nothing about the whole thing is fair, but we have it in place now.

I understand that you and others would like to wipe the whole thing clean in one fail swoop. If a tax proposal doesn't do that though, is it automatically bad then? Were Bush's 2001 cuts bad? The questions for debate are: Would you support a politician who proposed implementing a new federal income tax bracket of 60% on dollars earned over $1 million if the proposal was revenue neutral? Would this type of tax restructuring help or hurt the US economy? Why or why not?

JLMA, first, thank you for reading the study! Second, I think you are looking at it from the wrong perspective. I wasn't attempting to show the effects on the rich...I agree they will likely work just as much. Rather, this shows that data indicates there will be no corresponding increase in work by those receiving the tax break. What really needs to be studied (and for which I have seen studies, but, alas, couldn't seem to get google to come up with any) is the impact from spending by the upper and lower class. When lower income people get tax breaks, they don't work harder, they usually spend more. Rich people tend to invest such money. Which has a greater effect on the economy? I'm not sure... but I am sure this is the question that needs to be answered to determine the impact of this proposal on the overall economy, and also on tax revenue.

I would support it because it would help a lot more people than it would
"hurt." There comes a point where a civilization must look for viable
solutions to problems, regardless of whose responsible for the problems.

The super-wealthy didn't get super-wealthy all by themselves. You may
have individuals who started with nothing, and through diligence and
perseverance managed to build empires. That is to be admired. However,
the general public is usually a large part of the success of any individual
and/or huge corporation. For example: Bill Gates is successful because
we are all buying his "windows". The founder of JCPenney was truly an
inspiration, and his success was earned. But, if people didn't do their
shopping at his stores, he wouldn't have amassed all the wealth he had.
The list goes on. Actors, actresses; they all make the big bucks because
you and I go to see them at the theaters. So, we are all, to some degree,
responsible for the success of the super-wealthy.

Besides, the way I see it, if you are smart enough and lucky enough to
be in a position of super-wealth, you have a moral responsibility to help
others. If I'm ever in that position, I will consider it my moral responsibility.




I do understand where you are coming from, but when we are talking about
people who have so much money, it becomes ridiculous that they shouldn't
contribute more to help their fellow-men.

It's a fact of life that there are givers and takers. There are losers and winners,
and so forth. The world is what it is. To me, it's a shame to see people who
have more money than their great-grandchildren could ever spend, yet they
are unwilling to help the generation of today. It's a greedy way to conduct one's
life.

This needs to be looked at also from the perspective of the effect on the overall economy. If you distribute this money in the form of tax breaks, but the overall economy suffers because of it, thereby either eliminating jobs or reducing wages....did it really 'help'?



This is true, but the general public already receives benefit from this, in the form of taxes on these people, their companies, and the people who work there. So, that debt has already been paid. Further, people buy these products because they want them. So, just having the product available for purchase is a benefit in and of itself, leaving nothing further to be repaid.



I understand this position, but would like to make two points about it. First, people in this position do help others, both through their taxes and also through the many charitable contributions they make. Second, do we have the right to enforce them to accept this implied moral responsibility? Especially when you examine the statistics Amlord put forth showing that this group already supplies a very significant portion of the federal revenue, and also contributes a similarly high percentage to other charitable efforts? In essence, do we have the right to force excess charity on this group? What I imagine this comes down to is a definition of what constitutes excess. How much should this group be expected (forced?) to contribute?


More. Hmmmm. More than....what? They already contribute almost as much as all other people in the country combined, despite the fact that they only make up 0.1% of the population. From that, it seems pretty clear that they already contribute more than anybody else. What, then, is the driving need for them to be forced to contribute even more? What moral right do the rest of us have to force them to do so? At what point is it 'enough'?



Yes, but on what are you basing the assertion that they are unwilling to help? As pointed out above, they contribute a large percentage of government revenues. They also are very significant supporters of charity. Further, the companies they run or invest in create hundreds of thousands of jobs, and supply products that millions and millions of people benefit from. Doesn't really sound to me like this fits the definition of 'unwilling.'

Are you saying that the rich aren't people?

Newtonian laws seem to apply in free markets, for every action there is an equal and opposite reaction. If you force the rich to pay oppressive taxes, the rich will respond in ways to get around it, whether it be raising their rates on customers (effectively passing the tax onto the consumer), reducing the costs of their employees (outsourcing to cheap labor), using tax shelters, or simply moving business headquarters elsewhere. California had a number of fortune 500 companies leave the state during our most recent financial crunch.

Wealth redistribution by government is immoral. Even Jefferson understood that. Please read my avatar.

This is where we enter the area of what is "fair" vs. what more can the super-
wealthy contribute to their environment, without their standards of living being
diminished. That's what it boils down to. If the multi-millionaire can contribute
a larger percentage, and still maintain his lifestyle, and fulfill the needs and
expectations of his family, friends, loved-ones, etc, then who is being harmed?
It's only money, right?

I understand both sides of this issue because I am a huge proponent of
personal responsibilty. I do not like the idea that other people's irresponsible
actions are being shouldered by my tax dollars. It upsets me that each
human being doesn't do what it takes to be a self-sufficient, responsible
member of society.

At the sime time, I know that it will be a long time bofore that utopia will
be reached.

In the meantime, if the extra resources of the super-wealthy can be of
benefit to the ills of society, and his pocket-book won't feel the withdrawal,
let's do it. It might not be fair, but if it will be of benefit to the society of which
he is a part, that's good enough reason.





Yes, indeed. I'm not trying to diminish the great contributions of many.

There comes a point on the income scale where we've far surpassed the
point at which we can live in the lap of luxury and do so indefintely. Why
is it such a bad idea to expect more from those who can afford it?
It's gluttonous for those who are in such a position, to stand by, and watch
others suffer, when they could help more, and they wouldn't even feel it.



If taxing the super-rich at a higher rate will alleviate some of our societal
problems, and at the same time, it won't be felt in the wallet of the guy
whose being "over-taxed," where's the harm?

That's how I see it. Money is power. The more money the more power.
With power comes responsibilty. If you don't want to be responsible for the
less "fortunate" don't make so much money.

I couldn't disagree more. Are you saying that lowering taxes on wages does not encourage or get more people to take overtime? Your study, as I read it, shows that the effect is not as great as once thought in the past. There is still a correlation though.


First, again let me restate my firm belief that people work harder(and spend more) when income tax barriers are removed. The fact that people are working more instead of going home and watching TV or posting on is good for the economy of America.

Now you bring up an another economic factor on investing vs spending. Which is better for the economy? First lets check out the extremes. Obviously, if we never bought anything - our economy would go to hell. If we never invested, people would not have capital to pursue their ideas and could not take risks. The economy goes to hell. It has to be a balance. You assert that there would be less investing with this proposal and I agree with that to a degree. I contend that persons earning between $100,000 and $1 million would likely invest their extra capital just as much as the millionaire would. I don't think that it is a big enough shift to make a difference either way, but my gut tells me that spending is better overall for the US economy. Think about it. More people have expendable capital even after saving more. This creates a demand for goods and services, which encourages more companies to offer desirable goods and services, which increases job opportunities, which people are more willing to take since they are now keeping more of what they earn.

And dearjerkyDave, thank you for reiterating that people will move from state to state because of taxes and for completely ignoring my emphasis on the word country before. People will try to avoid the tax, just like any other tax. One way that people have avoided the death, or estate, tax has been to donate their money to causes that they believe in. Wouldn't that be an immoral travesty if that were the case here?

You seem to be saying that the United States is and always will be immune to the migration of rich people, regardless of how oppressive the taxation is, regardless of the fact that rich people migrate from oppressive states to less oppressive states, regardless of the fact that rich people migrate from oppressive countries to less oppressive countries. If your proposed tax scheme is founded upon this one giant assumption, then it is doomed to fail.

Before I comment on the debate question, I just wanted to address a couple of points made by other posters:

First, let's be honest about the very wealthy in the US (individuals and corporations). When you are wealthy, it is easy to move your money outside the US tax code. Any earnings you make on such money is taxed at a different rate in those countries; often tax free in certain countries. Not that I necessarily have a problem with this, but it does throw a monkey wrench in the whole flat tax proposal. How do you institute a flat tax when some of the earnings cannot be taxed? This is at least some of the justification for a progressive tax. Of course, one could argue that it just encourages more foreign earnings investment but there is an upper limit to this.

Second, while I agree that higher taxes on the wealthy may encourage certain folks to leave, I believe that it is possible calculate (or at least empirically determine) what that limit would be and remain under that limit. It isn't enough that a higher tax rate might cause folks to leave but rather if it will cause folks to leave. People weren't leaving when the tax rate was higher, thus, logically, raising the rates at least back up to those levels wouldn't make the sky fall.

Would you support a politician who proposed implementing a new federal income tax bracket of 60% on dollars earned over $1 million if the proposal was revenue neutral? Would this type of tax restructuring help or hurt the US economy? Why or why not?

Personally, I think the whole tax system is needlessly complex and often unfair. My pet proposal is to have the federal governments tax the state governments and have the state governments collect taxes in their own way. However, if the goal is to have the rich pay more, then I believe a progressive capital gains tax would be more appropriate. Of course, I'm not advocating this; I'm just throwing it out there.

What I'm most concerned about is the fact that the federal government is spending way beyond its means. I don't like that there were tax cuts with no commensurate reductions in spending; it's fiscally irresponsible; it's anti-conservative.

I'm not saying it...the author is, though. Actually, this is more evident in the second paper I referenced. They concluded that outside of the 80's (where there was a very dramatic change in the tax code) that any changes noted in income for lower income classes were insignificant (well within the statistical margin for error).



Don't forget that dollars spent higher up create revenue which then gets distributed to employees, who then also spend. So, spending eventually occurs either way. The question is in which scenario is more of it created. I'm not sure...but I don't think anybody else here is either. So, until we see some studies, we can't make the claim as to the effect the change would likely have on the economy.

I think that you can make a claim as to the effect on the economy without this answer.

I build bird houses(not really but hear me out) for Japedo's workshop. Since Uncle Sam takes 25 cents of every dollar I make, I'm not really motivated to make more than 8 birdhouses a day(one hour each). Now lets say Uncle Sam starts only taking 20 cents. The added incentive gets me to build 9 birdhouses a day now. America has one more birdhouse everyday to put on the open market. A harder working populace creates a stronger economy. If not, France would have just as strong of an economy as anyone else despite their 35 hour weeks. Don't you agree?

I don't agree simply because I think the premise is flawed.

Lets say that Japedo pays you 5 dollars a hour. And the government takes .25 from each dollar you make. You work 8 hours a day, making one bird house an hour. so you make 40 dollars a day, less 2.00 in federal income tax, and of course less your state and local taxes not to mention the terribly regressive social security, unemployment, and medicaid taxes.

Now, uncle sam cuts taxes to .20 cents on every dollar. you still work 8 hours a day and you still make 1 bird house an hour. You make 40.00 a day, less the 1.60 in federal income taxes and then the addition of all the other taxes.

Without increasing your productivity at all, you are now making .40 cents more a day. And, if you increase your productivity to 2 bird houses an hour, you will still make the same money (though Japedo would be more inclined to give you a pay raise with that higher productivity level).

The tax code change, in your example would not motivate productivity at all. Where do you see this motivation for hourly workers?

Now, if you were a piece worker and Japedo paid you 5.00 per bird house you produced, then you would earn 5.00 for each one made less the 1.25 cent tax (and all the other taxes). Sticking with just the federal tax in this example, you would then be making 3.75 per bird house produced. If the tax was reduced to .20 per dollar you would be making 4.00 per bird house.

Your willingness to be productive as a piece worker wouldn't be effected at all by the tax deduction. Each extra bird house you make earns you another 3.75 for the day. Be 3.75 or 4.00 after taxes you are still going to seek to make the most bird houses you can to be able to take to most money home to your family. The tax reduction would be beneficial in that it allowed you to take home an additional .25 per bird house, but it would no motivate you to produce more because you still made more, the more you produced prior to the tax change.

Ah, but then the progressive income taxes comes in and slams you once, because you made enough to jump into the next tax bracket which made it so you took less home making 30 bird houses a day then you did making 25 bird houses a day. If that happens to you once, you will likely stop making more then 25 bird houses a day.

Now what is the negative effect of Taxing the wealthy, in this case Japedo? Well to start with, it limits the amount of money Japedo can re-invest in the workshop because he no longer has it. Some of that re-investment can be in the form of wage increases.

It also makes companies like Japedo's re-evaluate their business. If the cost of doing business in America keeps rising and the ability to make a profit becomes harder and harder, then perhaps, a simple manufacturing business ike to one in your example would better serve the owner, investors and consumers by moving it to another country with lower regulations, lower business taxes, and lower average wages. Cost of production are cheaper, and less profit is lost to the goverment. This allows for higher profits, while being able to reduce the cost of the birdhouse to the consumer (an effort made to increase market share). Everyone makes out, except for the lower income workers this tax was supposed to help.

Be wary of the possible negative effects of such tax changes. If a few companies move over seas as a result I doubt the workers that now find themselves without employment would really care that they have a lower income tax rate on their unemployment check.

(emphasis mine)
Here higher taxes create a disincentive to being productive.