Hi cat,
It didn't take a "really" large income to get into a pretty nasty marginal bracket in some of those years not so long ago, either. Especially for a single filer.
I always recall back around 1980. I was single. Making a salary that equated to about ten or twelve bucks an hour. Good, comfortable income back then, but not huge money.
I was in a 39% marginal bracket. Another eight plus for the state. And with social security tax, I kept 46 cents of every additional dollar I earned. Not counting sales taxes, property taxes, etc.
I felt that to be quite excessive and onerous. And there is NO DOUBT that it had a direct effect on my decision making.
I was presented an opportunity to take a new position. It would have given me maybe a ten percent raise, and presumably an opportunity to further expand my income over a few years to a point maybe twenty plus percent above that of the position I had.
It also would've greatly increased stress and hours worked.
So I pondered whether or not I wanted to kill myself for a bit more money, of which the government would take 54% of it. And even more, really, as I would've moved up into an even higher marginal bracket that if I remember correctly was 45% instead of the 39%.
Didn't take me long to decide I'd "settle" for where I was. My decision was directly impacted by the heavy handed tax schedule.
Over the years, I've softened my negative stance toward highly progressive tax structures. To a point. But you've got to keep from providing severe disincentives to productivity. I'm pretty sure I'm not the only guy in the world that won't bother to exponentially increase my busting my ass for some more money if the govt is going to take the majority of it.
On a related note:
The whole cap gains thing can be easily solved by indexing gains for inflation. If you sell a property for a twenty percent gain after a holding period that saw inflation go up twenty percent too, did you really "make" anything? Conversely, the 60/40 treatment for futures contracts and the sort of things hedge funds do is patently ridiculous. Again, indexing for inflation solves the problem. All short term futures trading would end up taxed at full normal income rates.
Oh well.
D&O
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