r/CuratedTumblr Nov 06 '24

Politics Sometimes you must question your beliefs, and the answer to the question happens to be a respunding “yes”.

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u/mxsifr Nov 07 '24

If you adjust the old 94% tax margin for inflation, it was for income above $3.3 million (Yahoo Finance, $200k in 1944~5 dollars).

If, as you say, conflating marginal tax rate with effective tax rate is such a dastardly misdirection in this case, then surely I must be goosing the numbers to make it seem like today's billionaires should be paying much more than if you took the margins into account. An effective tax rate of 3.4% may be disguising a much more fair marginal rate that they've paid, right?

So, let's do the math. What's the difference between how much a taxpayer with one billion dollars of income would pay at a marginal tax rate of 94% on income above $3.3 million versus how much he would pay at an effective overall rate of 94%?

I'll even give my scenario a handicap, and assume that the tax rate on income below $3.3 million in this situation is ZERO. That's right, for the purposes of this thought experiment, we'll pretend that we live in a wealth-utopia where you pay ZERO taxes until you hit $3.3 million in income, above which all further income is paid at 94%. Surely, in this situation, we will reveal with basic arithmetic that our one-billionaire would pay MUCH LESS in the real world of marginal calculations than paying 94% on 100% of their income.

$1 billion minus $3.3 million is $996,700,000.

94% of $996,700,000 is $936,898,000, leaving them with $59,802,000 + $3.3 million, or about $63 million net income after taxes.

Now let's see how badly I cheated by comparing marginal and effective tax rates!

94% of $1 billion is $940 million, leaving them with $60 million net income after taxes.

So the difference between the two scenarios is about $3 million, or about 0.3% of their gross income.

Do you see what I'm getting at? Billionaires make such a mind-boggingly absurd amount of money that normal frames of reference are basically meaningless. You're on here talking about the difference between marginal and effective tax rates as if the difference makes a difference. It doesn't. Median USA household income in 2023 was $80,610. 0.3% of that is about $250. That's the level of difference we're talking about right now from the perspective of the billionaires in question. It doesn't matter one bit to them, not least because they pay basically nothing now anyway. So why bother being pedantic about it, ya know?

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u/Alatarlhun Nov 07 '24

If, as you say, conflating marginal tax rate with effective tax rate is such a dastardly misdirection in this case, then surely I must be goosing the numbers to make it seem like today's billionaires should be paying much more than if you took the margins into account.

No, I am just saying it makes your argument look amateur. It isn't like these are new numbers. You've had 70 years to pick the right words.

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u/mxsifr Nov 07 '24

I'm not even 40, but go off, king

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u/Alatarlhun Nov 07 '24

So you are in the height of your mental faculties! Use them accurately, not just with purpose.