When they leave, they take their investments, spending, and created jobs with them.
Many countries have confiscated everything from the rich, driven them out, and even mass murdered them. None resulted in the poor being better off - things just got worse for the poor.
Would you support a return to the top marginal tax rate of 91% on the ultra-wealthy, like it was during the 1950s and 60s, when the U.S. economy was booming, infrastructure was being built, and income inequality was much lower?
Those rates were never paid, as the tax code also allowed for all sorts of deductions and tax shelters. What Reagan did was lower the tax rate in exchange for getting rid of those deductions and tax shelters.
The trouble with tax shelters is they tended to be crummy investments. The tax code incentivized shifting investment money from productive investments to crummy investments. This is not good for the economy.
Or look at it this way. If Musk was taxed at 91%, there would be no SpaceX, Starlink nor Neuralink. What wealthy people do is invest the money (you can only spend so much money on fine dining and snazzy clothes). Investing the money creates jobs and wealth that make the rest of us prosperous.
The idea that a 91% top marginal tax rate would stifle investment or innovation is misleading. Sure the ultra-wealthy will always use deductions and shelters to lower their effective tax rates, but even with those, they still paid significantly higher rates than the ultra-wealthy do today. And the economy didn’t collapse under those high rates—in fact, it grew at about 4% annually, and we built a thriving middle class.
Wealthy individuals and corporations still invested because the tax code encouraged reinvestment into productive ventures like infrastructure, research, and business expansion rather than hoarding wealth.
Reagan’s reforms didn’t simply eliminate crummy tax shelters—they slashed the top rate to 28%, which kicked off a massive concentration of wealth. And the idea that the wealthy always reinvest their money into productive ventures is a just-so story that is more myth than reality. A lot of that wealth today goes into stock buybacks, speculative assets, and offshore accounts that don’t create jobs or grow the economy.
Musk and his ventures are a terrible example. SpaceX and Starlink wouldn’t exist without billions in government contracts and subsidies. Public money was a huge driver of their success, not just private capital.
The idea that lowering taxes for the ultra-wealthy benefits everyone just doesn’t hold up to scrutiny.
But let's flip things, What tax rate do you think the ultra-wealthy should be subject to? Why that number? Personally, I don't claim to know enough about economics to be certain about this but I feel that the 1950s-1960s in America was a time of great growth for the middle class and government funded technological development and that the tax policy of the time likely played a large part in that.
> The idea that a 91% top marginal tax rate would stifle investment or innovation is misleading.
If you make $100,000, at a 91% tax rate you'd have $9,000 left over to invest. If you are taxed at 28%, you'd have $72,000 left to invest. $72,000 is greater than $9,000.
> And the economy didn’t collapse under those high rates
Right, because they weren't actually paying those rates.
> hoarding wealth
The wealthy do not hoard wealth. There are no Scrooge McDuck cash vaults. All their money is invested, not hoarded. If you tax the money away, it is no longer invested.
> kicked off a massive concentration of wealth
Wealth creation is not "concentrating" wealth. Wealth is not a fixed pie.
Musk did get government contracts for rockets. If he hadn't successfully delivered the goods, he wouldn't have been paid. Those rockets also cost 10% of what it would have cost NASA otherwise. A government contract is not a subsidy. SpaceX and Starlink were not subsidized.
I subscribe to C. Northcote Parkinson's observation that a 10% flat tax makes for the most prosperous economy while providing sufficient funding for the government. (He's mainly remembered for Parkinson's Law.)
> A lot of that wealth today goes into stock buybacks, speculative assets, and offshore accounts that don’t create jobs or grow the economy.
They do, except for offshore accounts, which benefit other countries. (All investments are speculative.) Stock buybacks are also investments.
> If you make $100,000, at a 91% tax rate you'd have $9,000 left over to invest. If you are taxed at 28%, you'd have $78,000 left to invest. $78,000 is greater than $9,000.
This is a misunderstanding of how marginal tax rates work. A 91% marginal rate only applies to income above a very high threshold. In the 50s and 60s, that rate didn’t kick in until income hit around $2 million in today’s dollars. So no, someone making $100,000 wasn’t being taxed at 91%. And the ultra-wealthy still had plenty of money left over to invest after deductions and shelters, which is why the economy grew so well.
> Right, because they weren’t actually paying those rates.
True, but they were still paying effective rates that were much higher than today’s ultra-wealthy. The top 0.01% today often pay effective rates around 20%, while back then, even after deductions, they were paying closer to 50-60%. That’s a big difference, and it contributed to a more equitable economy. Do you think that the economy is healthier today and that this is a result of the current tax policy?
> The wealthy do not hoard wealth. There are no Scrooge McDuck cash vaults. All their money is invested, not hoarded. If you tax the money away, it is no longer invested.
This is a cute image, but “hoarding” doesn’t mean stuffing cash under a mattress. Hoarding happens when money is funneled into assets that don’t circulate productively in the economy—things like luxury real estate, golf courses, art, or stock buybacks that inflate share prices without creating value. Investing in financial instruments that primarily benefit the ultra-wealthy doesn’t generate the kind of broad-based economic growth that happens when money flows through the middle class.
> Wealth creation is not “concentrating” wealth. Wealth is not a fixed pie.
True, but wealth concentration is still a problem. While wealth isn’t a zero-sum game, extreme concentration reduces economic mobility and slows down overall growth. When too much money pools at the top, it reduces aggregate demand, which is what drives a healthy economy. If you don't think that this is a problem with current levels of wealth distribution, what levels of wealth inequality would we have to see for you to consider a problem?
> A government contract is not a subsidy. SpaceX and Starlink were not subsidized.
This is semantics. SpaceX received millions in government contracts before proving its capabilities. Early-stage government money often functions as a de facto subsidy, reducing risk for the private sector. NASA essentially de-risked SpaceX’s early development, and without that, it’s unlikely SpaceX would have succeeded. Government contracts don’t magically appear out of nowhere—someone took a bet on Musk, and it was with taxpayer money. I think that's great, but we should have more tax money to make these kinds of bets and we can get that money by having higher taxes on the ultra-wealthy.
> I subscribe to C. Northcote Parkinson's observation that a 10% flat tax makes for the most prosperous economy while providing sufficient funding for the government.
A 10% flat tax? That’s fantasy land. It’s a cute theory that ignores the realities of modern economies. Flat taxes disproportionately burden the poor and middle class while letting the ultra-wealthy off the hook. There’s a reason no prosperous nation has implemented a flat tax at that level and maintained the kind of infrastructure, education, and public services necessary for sustained growth.
Even Estonia, often held up as a model of flat taxation, doesn’t follow that script. Estonia’s system isn’t a pure flat tax—there’s a 20% flat income tax plus a 33% payroll tax for social services. And importantly, Estonia relies heavily on VAT (value-added tax), which disproportionately impacts lower-income households.
> Stock buybacks are also investments.
Not really. Stock buybacks are often a way to boost share prices and executive bonuses. They don’t add productive value to the economy or create jobs. In fact, before 1982, they were considered a form of market manipulation and were illegal.
1. Yes, I am well aware marginal tax rates. For a rich person, the marginal tax rate asymptotically approaches all of the income. You didn't reply to my point, though, that money you tax away from people takes away from their investments. This is the point behind an IRA, FWIW.
2. No, they were not. They were tax sheltering their income. Nobody paid anything near 91%, unless they did not hire a tax accountant, which would be stupid. Wealthy people are rarely stupid with money, that's why they're rich. (ESPN ran a documentary once about NFL players suddenly becoming rich and just as suddenly going bankrupt because they had no idea how to manage it.)
3. Art is an investment (they expect it to appreciate). So are golf courses (golf players pay to use it). So is luxury real estate (real estate appreciates). Stock buybacks mean buying stock, which is an investment.
4. There's no evidence that "extreme concentration" does anything of the sort, especially since wealth is created, not concentrated. Bob creating more money does not take anything away from Fred. Bill Gates never took any money from me. Neither did Steve Jobs, nor Elon Musk, nor Jeff Bezos. Nor did they ever take money from you.
5. It is not semantics. Having an exchange at market prices is NOT a subsidy. A subsidy is a gift of money. NASA did not buy those rockets as a gift to SpaceX. NASA bought them because they cost 10% of what NASA rockets cost, and NASA used them. NASA did not bet on Musk. If the rockets didn't work, Musk would not have been paid. Musk was losing money, and one more explosion would have bankrupted him. But that one flew, and Musk got paid. NASA did not take a risk on Musk. Musk took the risk.
6. Parkinson is a better economist than you or I. Why not read his books? They're quite good. Do you know the US did not have an income tax until 1913? It was quite prosperous, including public education.
7. Stock buybacks are a method of distributing profits to shareholders without the high tax rate on dividends.
> Stock buybacks mean buying stock, which is an investment.
This is wildly incorrect, in that the purpose of stock buybacks is to reduce the number of shares and juice metrics like earnings per share (which weirdly enough, lots of CxOs are bonused on).
> Yes, I am well aware marginal tax rates. For a rich person, the marginal tax rate asymptotically approaches all of the income. You didn't reply to my point, though, that money you tax away from people takes away from their investments. This is the point behind an IRA, FWIW.
Your first comment (around the 100k income and different tax rates) had the weird marginal/total tax rate confusion, so if you'd prefer to avoid that be more clear in the future. As an example, I pay 52% marginal, but about 35% overall.
> 7. Stock buybacks are a method of distributing profits to shareholders without the high tax rate on dividends.
Correct, but I think this is a bad way and encoyurages non optimal behaviour.
As I said, stock buybacks are a method of distributing profits to shareholders without the high tax rate on dividends. That's why it's done, though another reason is to invest in one's own company, which is done in the belief that one's own company is a better investment than investing in others.
There's nothing nefarious about it.
> had the weird marginal/total tax rate confusion
I simplified it to emphasize that taxing money away from someone leaves them with less money to invest. The issue of tax rates being marginal is irrelevant to that point. Also, for a high income person which is what we are talking about, the marginal tax rate is his overall tax rate.
> I simplified it to emphasize that taxing money away from someone leaves them with less money to invest. The issue of tax rates being marginal is irrelevant to that point. Also, for a high income person which is what we are talking about, the marginal tax rate is his overall tax rate.
This isn't generally true. I'm in the top 5% of income earners in my country, and my marginal and effective tax rates differ by a significant amount (35 effective vs 52 marginal).
> As I said, stock buybacks are a method of distributing profits to shareholders without the high tax rate on dividends. That's why it's done, though another reason is to invest in one's own company, which is done in the belief that one's own company is a better investment than investing in others.
That's certainly one rationale. Personally, I dislike them in most cases (they make sense for companies that provide a bunch of compensation in stock). I personally think that dividends encourage market behaviour that is better (I'd never have sold my FB stock if they'd paid me a dividend), as well as reducing number go up as the only way to gain money from investing.
> though another reason is to invest in one's own company, which is done in the belief that one's own company is a better investment than investing in others.
This is really dodgy from my perspective as by definition, a company has more information about their future earnings than another investor does. I realise that this ship has sailed, but personally I'd prefer to reduce dividend taxes for re-investments and ban most buybacks (but again, this is probably a niche position).
P.S. Income tax is based on income. If the wealthy were hoarding money, they would realize no income and no taxes will be collected. To generate income, the money has to be invested.
Correlation != causation. The US economy in the 1950s and 1960s was a very different beast - Europe (the main industrial competitor) was in ruins, wealth was very much more tied up in factories and plant, and less in equities and other soft assets. The currency was still tied to the gold price. It may as well have been another planet compared to today.
It depends - Western countries exist in a fiat currency world without a gold price tether, so governments that are sovereign in their own currency do not depend on tax receipts to provide services (the Eurozone is a different kettle of fish due to the common currency and lack of defined horizontal stabilisation).
Generally, if governments foresee the need to encourage economic activity, they should reduce tax rates. If they predict their economy is or will become overheated, they should increase tax rates. If they wish to buy votes from people who don't understand how money and tax work in an untethered fiat currency world, they should increase tax rates into the 90%+ range; however, this will cause economic disruption with some time delay, which those responsible will hope they can blame on the party in power at the time of the disruption.
Yes, I am more cynical now than I was 20 years ago.
That's the wrong question. The correct question is, "If California increased income tax, how many software developers would leave for another jurisdiction that did not increase income tax, and would the total tax taken from all software developers in California be higher or lower after?". There are also moral questions.
They also sit in the Bahamas for 6 months before becoming very bored and realising their friends and socio-cultural life in London isn’t easily replicated elsewhere.
Have you seen the stuff that has been outsourced from all of the West? They DO leave for cheaper places, whether that be because of taxes or wages. And if you really leave them no other choice, they might just go out of business.
You don't have to be greedy to not want to be robbed. You do have to be kind of tight with money, aka greedy, to run a competitive business. How often are you paying much more than you absolutely have to for anything? Our greed forces businesses to be run in a greedy way. It's called efficiency.
They outsourced industry, because the logic of industrial production is that all costs should be driven as low as possible and much human labor is fungible.
The claim here is that high taxes on earnings will cause capitalists to leave and take the jerbs with them. A different context, and a scenario that fails to consider the existence of domestic competition, capitalists' desire to sell into the most profitable market, preferences about where to live etc.
Yes it is slightly different but we are talking about people who start and run businesses, typically. Unless living here comes with some tremendous benefits that transcend money, they will leave. They generally have little loyalty to their homeland. I wouldn't either, if my homeland wanted to take me for all I'm worth in taxes. Not only would I consider leaving if I had more money, but I know of people who specialize in helping moderately wealthy leave. They cater to people who have a few million dollars and up.
>They outsourced industry, because the logic of industrial production is that all costs should be driven as low as possible and much human labor is fungible.
It's not just industrial production, it's the top jobs that people on this site need. Jobs in software and other kinds of engineering are increasingly under threat. There is some merit to seeking lower costs, and we benefit from that, but it's also possible to paint yourself into a corner from a national security standpoint. My point remains: the same cost-saving motive that drives wealthy people to preserve money in life and business is likely to push them out of the country if we oppress them.
There are many real-life examples of people fleeing for economic reasons. Why is it so easy to believe that day laborers or doctors would flee for greener pastures, but hard to believe that many wealthy business owners wouldn't?
There are plenty of examples of people redistributing wealth, whether through taxes or less palatable means that worked out well for the poor. There are also plenty of places that do nothing that are a disaster.
"Redistribution" at some point becomes blatant theft from productive people to give to unproductive people. I guess taxes need to scale up with wealth to some extent but it needs to be done in a way that doesn't encourage freeloading and doesn't encourage envy.
Yeah? So, they are going to take their factories? They are leaving the biggest consumer markets to sell their trinkets in the giant Costa Rican market?
In Washington State, a tax on capital gains over $250,000 was recently instituted. Jeff Bezos, presumably the target of the tax, left the state just before it went into effect. Friends in the area have told me that many Microsoft wealthy people have left as well.
Seattle has instituted a number of punitive taxes on businesses in the city. There has been a corresponding boom in business across the lake in Bellevue.
The state has benefited a lot by being a low tax state in the past. It is no longer a low tax state. We'll see how that goes.
Musk is one of the more famous industrialists who left California over taxes.
Many countries have confiscated everything from the rich, driven them out, and even mass murdered them. None resulted in the poor being better off - things just got worse for the poor.