This is very misleading. First of all, the top income rate in the US applies to individuals making over 400K - that is much higher than 1.6 times average income. Second, you should be comparing effective tax rates, not marginal tax rates. Here is a chart of the effective tax rate plus social security for those making over $300K:





As you can see, as of 2012 Americans earning over 300K pay 30.5%, whereas the Swedes pay 49.8% and Norwegians pay 49.7% for combined income and social security taxes. You can argue over whether or not this is a good thing, but it is false to claim that rich Americans pay more in income taxes than rich Scandinavians.

EDIT: I think I misread your point on the first criticism which is more about middle class rates , but I'll maintain my criticism of using marginal instead of effective rates.

I didn't make that claim. You completely missed the point. The point is that the middle class in Scandinavia are paying heavily for their system. This was a counterpoint to the claim that only the very rich have their stuff taken from them.

In fact, I have to ask why the rich in Scandinavia are in the same tax bracket as the middle class? Shouldn't they be in a higher tax bracket? Someone's getting screwed!

Progressive taxation is not the best way to reduce inequality. Post-tax transfers are more effective:



EDIT: I'm not saying that progressive taxation isn't also helpful, but the US is not an outlier there.

You're still arguing a completely different point.

I'm answering the question you asked.

Again, my original point was that the middle class in Scandinavia are paying heavily for their system. This was a counterpoint to the claim that only the very rich have their stuff taken from them.

And the site you linked to agrees.

Do you disagree? Do you think that only the very rich get their stuff taken from them in the socialist system? Everyone else gets off easy?

No, I don't disagree. Significant increases in government spending would probably require more taxation on the middle and lower classes. Progressive taxation is fine, I support it, but I think there is more potential to reduce inequality through government transfers than from making the tax code more progressive.

Ok, fair enough. I'm happy to move into the new topic.

Please explain what you propose with post tax transfers and how they would work exactly in your ideal world.

i read the entire paper but im not sure what post-tax transfers mean. is it something like these payrolltaxes?

No. A post-tax transfer just means government spending on social programs, eg education, healthcare, retirement, welfare, etc.

Think of it like this. Let's say there is some base level of income inequality based on wages and investment returns. If the government uses a flat income tax, the inequality after the tax would be the same. If the government uses a progressive income tax, the inequality after the tax will go down. This is because the government took a higher proportion of income from higher than average earners and a lower proportion from lower than average earners. That is one way government policy can affect income inequality.

However, another way government policy can affect inequality is through spending. For instance, let's say a country had a flat tax rate at 50%, which is then distributed equally to everyone (i.e. a post-tax transfer). That would also reduce inequality, because people who make more money pay more in taxes even at a flat rate, whereas the distribution is the same for everyone.

Meh. I don't really care that much about ideal worlds. But sure, ideally I prefer consumption taxes to income taxes. I think the declining marginal utility of money, investments in education, and social insurance gains imply utility gains to some government redistribution. I think the usual suspects here are fine: education, healthcare, retirement, welfare, infrastructure, etc.

Again, i agree with you in theory. It's all very nice when explained like that.

So tell me exactly what post-tax transfers you'd like to see, precisely how much will they cost, and how will a country like the USA pay for it?

Even more importantly, how would a country that is NOT rich in resources pay for all this? Or should rich countries fork over benefits to poor countries? After all, it's not fair to leave them out in the cold just because they were unlucky enough to be born in a ****ty place, right?

Are you asking someone on a forum to write up an entire national budget proposal?

Something less vague than, "These post-tax transfers are gonna be yuuuge! They're gonna be beautiful! And the Mexicans are gonna pay for it. Just trust me!" would be nice.

"Who is going to pay for that?" is typically asked by this ignorant FOX-news reporter who hardly ever read a book in his life.

in the paper that was linked there was a propasal how to change the tax-system, on the last 2 pages when i remember correctly.

I favor a system of progressive taxation with marginal tax rates.

http://www.investopedia.com/terms/p/progressivetax.asp

Good.

I've already told you what transfers I'd like to see: government spending on things like healthcare, education, retirement, welfare, etc. I think there are many forms these transfers can take, which are more or less efficient and equitable. Cost depends on the program obviously, and a country like the US pays for it through taxation.

Taxation, foreign aid, NGOs and so on.

Sure, foreign aid is helpful. I don't think it is the secret to creating a growing economy, which is the most important thing for a poorer country. That has more to do with rule of law, entrepreneurship, free trade, and historical factors.

I agree it isn't fair.

This is a inaccurate characterization of my views.

You're the guy who said only the very rich will pay. LMAO. You don't even understand the basics.

Get an education before you run your squeaker.

I wasn't responding to you in that post.

Again, this is all very vague. How much exactly will it cost? Who will pay? How much will each person have to pay exactly? How will this affect the economy? Motivation to succeed?

It all sounds wonderful when vague terms are used. When the bill comes due, however, it all sounds very different.

I'm not a fan of true capitalism, because only a few get rich and everyone else sucks it. I'm also not a fan of true communism because then everyone sucks it. Are you suggesting a point along that continuum or are you buried at one end? I personally would like more socialism than the USA, but less than Scandanavia.

This isn't an exam. Pick a question and I'll answer it as best I can, but don't keep giving me lists of questions.
Okay.
I'm not sure what you mean by "true communism" or "true capitalism." In general though, I think capitalism has been a boon to human prosperity and happiness and communism has not. I am generally opposed to public ownership of the means of production.

These are all standard questions for someone with your position, but ok, we can start with one.

How much will it cost to do all the things you would like see done?

Probably somewhere between 25 - 48% of GDP in developed countries.


(Tax Revenue as a share of GDP)

Will it help if we skip ahead to where I acknowledge that taxes can create deadweight loss and disincentivize working?