Isn't consumption what drives the huge American economy? I'm not an economist, but it seems like implementing a bigger sales tax would reduce consumption, which would reduce profits, which would results in less jobs and smaller salaries. So in effect you would be reducing take home pay and increasing the price of goods. Is my logic here incorrect?
If we subjected you to a 99% tax rate tomorrow, would you work less than before? A yes answer is all that is needed to concede the point theoretically. Then, we're just arguing about magnitude. And I just don't believe you if you answer no: Who is going to work a full-time $50,000 a year job when they're only taking home $500/year?
This argument assumes that there is a monotonic effect of taxes on my desire to work. I'd argue that if taxes were raised a little, I would work a little more. I think therefore that it is more reasonable to assume that the taxes->work hour function is concave.
I'm willing to concede that the effect is uncertain at low and middle incomes, but I think it has been shown quite convincingly that when tax rates go up the rich work less.
If you suddenly went from a 30% to 40% tax rate, couldn't you imagine working more to make up the difference? There is a lot of social pressure to maintain lifestyle. American wages have stagnated since the 70s and people are working longer hours than ever.
Reported income is not comparable to effort or economic activity.
The Slate article states that when income tax rate increases, the rich report less income, by fudging their taxes. It says nothing about rich people expending less effort.
Please explain this reasoning? Do you have any direct evidence this would be the case, in a general sense and not just personally? Income taxes in the US were the highest they've ever been in the 50s, 60s, and 70s and those were some of the most productive decades in this country's history.
