hiring managers would use it to convince people to take sub-100k wages. This pretty much happens already in progressive taxation countries(e.g. belgium) where you can actually make less money by having a higher salary because your tax-rate increases.
I have yet to see an example about net pay decreasing with marginal tax rate increase. When you earn 120k, only those 20k over 100k will be taxed with the higher rate, not the amount below 100k, so every increase in gross salary leads to increase to net salary.
If you include welfare state benefits (which have wage-income-based phaseouts) in income, it's not hard to produce such examples. http://mises.org/daily/3822 has a simple case which has >100% effective marginal rates between about 20k and 50k for a family with one adult and 2 kids.
_That_ is the sort of thing that could go away with a guaranteed basic income. At that point, you'd just have taxes, which do in fact behave as you describe.
The US AMT can have that punitive effect, because AMT is an alternative calculation, not a marginal calculation. Yeah, not marginal, but it is a common tax system.
And there are some programs that don't have marginal phaseouts. Each one is trifilingly small, but they may add up.
Even programs with marginal phaseouts can end up adding up to the phaseout being > 100% of the income (e.g. 10 programs, each of which marginally phases out 11 cents on the dollar).
>This pretty much happens already in progressive taxation countries(e.g. belgium) where you can actually make less money by having a higher salary because your tax-rate increases.
All sane countries with progressive taxation always apply the higher tax bracket only to the part of the salary that is in the bracket.
E.g. if the tax is 10% < $50k and 25% >= $50k, a $60k salary would have to pay 10% * $50k + 25% * $10k in taxes, and all wage increases increase net pay.
> This pretty much happens already in progressive taxation countries(e.g. belgium) where you can actually make less money by having a higher salary because your tax-rate increases.
You don't understand how progressive taxes actually work. This simply doesn't happen. You can't make less money by making more money.
yea, I might have gotten it wrong about progressive taxation. The context I picked it up on was in choosing a higher salary vs. some benefits. The benefit did lead to more spending power compared to the salary increase and HR would push for this as salary increases would lead to more costs for the company.
That's why taxes must be proportional too.
The state spends X euro, the productive economy pays Y euro of salaries+dividends, therefore everybody pays incomeX/Y of taxes. X/Y is the income tax rate.
Or if you prefer to tax sales, with Z being the total amount of sales, priceX/Z. X/Z is the VAT rate.
