History of the Progressive Tax Structure

[ebacon]

Good stuff.

My understanding of the history and benefit of the progressive rate tax is that it provides a disincentive to make ludicrous amounts of money off of the labor of others and/or by benefit of machine. It basicly helps create jobs and stabilize the economy by allowing the marketplace to divide itself into smaller pieces of pie.

After a man made his few million for the year the progressive tax kicked in and curbed his motivation so that another motivated man could also get his few million.

Exactly how much money was considered enough was haggled over by the legislature and adjusted annually by finagling the tax tiers and associated rates.

The way I see it it would be better to have a thousand millionaires than one billionaire.

On the other hand I can see where voters might have been fed up in the late 1970s and finally got rid of the progressive tax for all practical purposes. Looking at the tax schedule history it did reach down to the upper middle class during the last years. I suspect the feds wanted money to pay for the military and the voting majority was all warred out after Vietnam and stories of hundred dollar hammers made by crony capitalists.

Is that a fair summary of what happened? I'm hoping for a reply from those that were middle aged at the time. I was barely of voting age and just got hooked on Ronald Reagan's cowboy persona.

[beej]

The 70s were a tough time tax wise. Not only were we dealing with a Vietnam financial hangover, we were in the midst of the Cold War, hadn't really a clue of a handle on entitlements. Not sure if any of that is what drove Reagan's election or if it was what many saw as Carter's ineffectiveness.

[finnbow]

Originally Posted by ebacon

My understanding of the history and benefit of the progressive rate tax is that it provides a disincentive to make ludicrous amounts of money off of the labor of others and/or by benefit of machine.

I think studies have shown that the disincentive kicks in only when the level of taxation goes north of 50% (or even more). Raising or lowering taxes in the 20-30% range by a couple of points has no such effect.

[ebacon]

Originally Posted by finnbow

I think studies have shown that the disincentive kicks in only when the level of taxation goes north of 50% (or even more). Raising or lowering taxes in the 20-30% range by a couple of points has no such effect.

That's why I picked 1981 as the cutoff date. That was the year the top tier went down to 50%. In 1980 it was 70%.

Where the discincentive actually kicks in of course varies by individual. For a laboror such as a dentist the disincentive probably kicked in pretty fast. For a fat cat that makes money sitting on his butt probably not so much.

[piece-itpete]

It's a darn good thing that say Jobs didn't stop at a mil.

Pete

[ebacon]

Originally Posted by piece-itpete

It's a darn good thing that say Jobs didn't stop at a mil.

Pete

But if he didn't would he have stopped? Would it matter if he had stopped? Sure he was charismatic and a great industrial designer but he was not a great inventor of circuits or software. His team helped him.

Steve Jobs is an inventor on 282 United States Patents. Almost all of them, greater than 90%, are design patents. Also almost all of them, if not all of them, name a lot of other joint inventors. That means Steve had a lot of help. A LOT. Also note that design patents only protect what an invention looks like. By law a design patent cannot protect what an invention does.

I don't want to knock a dead man but like any other fellow in history Steve Jobs was not irreplaceable.

[piece-itpete]

Neither are millions of others. I am simply pointing out that the profit motive has given us the wonders of our daily lives.

I'm not fond of government social engineering

Pete

[d-ray657]

There is not an absolute correlation between money and power, but a very significant one. The consolidation of wealth facilitates the consolidation of power. Those of us here cannot afford lobbyists. Those with wealth can. That enables those with wealth to manipulate the rules to allow them to accumulate more wealth. It's an ugly cycle. To the extent that a progressive tax structure slows down the accumulation of wealth, it also makes for a more equitable distribution of power. I just wish we still had a progressive tax structure.

Regards,

D-Ray

[ebacon]

Originally Posted by piece-itpete

Neither are millions of others. I am simply pointing out that the profit motive has given us the wonders of our daily lives.

I'm not fond of government social engineering

Pete

And then we're both on the same page. The only difference is how many dollars does it take before ones motivations are satisfied and courtesy kicks in to leave a little for the other guys that hustling to make a buck or just starting up.

The fact of the matter is that a man will tend to engage in whatever endeavour he has a natural skill for. It might be engineering, or athletics, or art, or music, or culinary arts, or medicine, or any number of trades. Profit motive plays no part in mans tendency when it comes to love of labor. On the other hand he might neglect a labor of love if there is not enough money in it to live on.

Profit motivation theory only goes so far. After some point it is fair to say that a man's head is messed up if he needs billions of dollars and other peoples' failures to be happy.

That is not an attack on Steve Jobs. He walked away from Apple to pursue other artisic interests and then got called back to put Apple back on course. Steve seemed to love art. I don't think he was motived by the profit motive. Instead he seemed to be well compensated for inspiring beautiful work.

[piece-itpete]

My reading of history has led me to seriously doubt most aultrisim. It's nice, it happens, but I wouldn't count on it

So where do we put the cap, how much do we decide is enough for other people? Remember when the tax code was reformed a lot of tax loopholes were closed. I'd like to see a chart of the actual percentage of taxes paid back then.

Pete