It's often difficult to tell the difference between a stranger wallowing in ignorance and a stranger deliberately pretending to be ignorant, with AI-driven bots an additional factor in an already difficult game.
Still, it occurred to me as I saw someone pretend that progressive tax brackets are anti-capitalist, that even if the commenter in question was a troll, it is an issue that involves a lot of numbers, and so others might benefit from being reminded how things work.
Someone online wondered what is the point of capitalism if working hard leads to "penalization" in the form of a higher tax rate. But of course, there is no point at which earning more money leaves you with less money.
Even at a 90% top marginal income tax rate, which we had during the 1950s and 1960s (boom times!), earning one extra dollar more than $400k would mean another dime in your pocket.
Still, one might say, it seems odd that the harder I work, the more goods I make, and the more goods I make, the higher percentage tax that gets taken from me!
This seems like bad reasoning on multiple levels.
Firstly, nobody should kid themselves: How hard you work has very, very, very little to do with how much money you earn. Right there are people working much harder than anyone reading this and probably making much less. There are also people doing next to nothing and earning more every year than any of us will earn in our entire lifetimes. I think it is fundamentally wrong to talk about the effect of income tax brackets in the abstract, as if they'll hit all of us, rather than putting concrete numbers to is. CEOs don't work 200 times as hard as their employees, and yet earn 200 times as much on average. That's concrete.
Secondly, why focus on the percentage brackets at all? In one sense it's as simple as this: the more goods you make, the more money you earn! I'll say it again: There is no point at which earning more income means less money in your pocket.
But let's say you really are fixated on the percentages. Okay, fine. Try this one on for size: The tax rate in the US is 37%, period. It just is. But as a country, we recognize that people may be struggling to make ends meet, ad might be enormously burdened by that, so we give several different kinds of discounts.
We give everybody a "standard deduction" on which we charge no tax at all. So a single person earning $14,600 pays zero income tax on any of it. We also allow for some deductions even with the standard deduction so that money paid to charities reduces the tax you might owe, too.
After that we give additional discounts, since you're still working your way up the earnings ladder.
If you earn $578,125 or less, you get a small discount, and if you earn $231,250 or less, you get an even bigger discount.
You get a really big discount if you earn $182,100 or less, and another small one at $95,375 or less, and a huge one at $44,725 or less.
I mean, at that point you're getting two-thirds knocked off the normal 37% rate, which is huge!
I think it is a very good thing that the tax structure makes things easier for those of us who haven't yet reached $578,125 in income per year. I would be delighted to one day reach my full 37% tax rate!
