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July 13, 2013



>>state that takes a large chunk of your income is an oppressive one>>

Even if your success is due to the structure of the state and results in higher after tax income than an alternate state?

>>what's so good about higher top tax rates?>>

There are things government does better and progressive rates are better than flatter rares due to declining marginal utility and other factors.

>>I would rather live in a society with low pre-tax inequality and low tax rates>>

Dean Baker persuasively argues that government policy is responsible for much pre-tax inequality, for example, monetary policy, patent protection, trade policy, too big to fail subsidies, etc., etc.


"Lower top taxes incentivize rent-seeking and the creation of risk pollution." CD

I've read this on here before and unfortunately there never seems to be a link to this claim.
I'm a being a bit lazy here [it's the hot weather, I think] but I can't figure out from first principles why that should be the case.


>>state that takes a large chunk of your income is an oppressive one>>

"Even if your success is due to the structure of the state and results in higher after tax income than an alternate state?" foosion

Surely the fact that something impinges on your freedom/liberty [the big state] is entirely independent of whether it confers financial advantages or not?

The Thought Gang

@ foosian

Do you find that those who wish to attribute economic success to the platform provided by the state are rarely the same people who lay the blame for economic failure at those same stately shoes?

People have been successful and unsuccessful since long before there was a state. What the modern state does do, is set the parameters within which once can achieve success. Notably, I'd say, by limiting the use of swords, and loosening the grip of good fortune.

As a relatively young, but heavily taxed, person.. my perspective is that the state does a great deal more to assist those who have wealth to preserve it than it does to assist those without it to attain it. High taxes on income, in that light, are part of the problem. But I guess I would say that.


The main policy problem with high marginal tax rates is the fluidity across national boundaries. "Let's not try top win a race to the bottom" always sounds lovely but if you don't play the game then the wealth will be created, and taxed, elsewhere.


Is not the problem that the Gummint has high fixed costs and a pressing problem how to meet them, nothing to do with social justice or incentives.

Dare not go for a smaller state 'cos we all vote lower-middle class and sod the growth. Dare not tax the rich for fear of damaging the little growth we have. The problem seems to be the high fixed costs of running UK plc coupled with the difficulty/impossibility of investing for long-term growth and the difficulty of winding down the fixed costs. Very tricky.

Now the world is very small and the pin factory goes to the cheapest - the human brain being much the same everywhere.
But here lies a justification for taxing the rich, if you like living here then pay a hefty tax - or sod off and live with your family in the hell hole where your money is made. Not so fast, not workable, every government wants a good helping of the rich, so we are back to that delicate balance.

Like it or not the rich are usually clever and active or hire those who are, the poor are frequently dull and hire no-one. What galls is the dull and rich staying that way. Herein lies the rub, how to increase the brain-power of GB plc - a vain exercise IMHO - any feasible scheme is doable by anyone else.


Low top tax rates increase leakages into savings and reduces demand.

Re-injecting these surplus incomes via taxing and spending ensures that the money is not removed from circulation, and has a positive impact on GDP. So high marginal top tax rates are most likely to be beneficial - sufficiently beneficial to more than offset the alleged disincentive effects

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