What is a “fair” tax rate for poor people, rich people, and companies?

And now for a break from the marriage debate, let’s talk TAX!

Specifically, tax rates. A flat tax rate provides consistent incentive to be productive. Getting less of the reward for effort as you put in more effort means most people will put in less effort.

So what’s “fair”? Well, that’s a stupid term in itself, because it’s not at all fair that someone else forces you to give them money against your will to give to people who haven’t earned it. But assuming there is such a thing as “fair”, the typical argument is that people who earn more should pay more.

If Johnny makes $50,000, and Jimmy makes $100,000, and they are both taxed at 20%, Johnny would pay $10k tax and Jimmy would pay twice as much because he earned twice as much. That’s fair.

But what about people on really low incomes? Is it “fair” for someone on $15,000 p.a. to pay 20% when he can’t even afford a $300/w rental home? Well, I think so, but let’s be generous, and give everyone a tax free threshhold of $20k. They will pay nothing until they earn more than $20k, and then only the same rate as everyone else on whatever they earn above that.

Now, if Jackie earned $25,000, he would only pay 20% tax on $5,000 (the amount he earned above my imaginary tax free threshhold of $20k), which is only $1,000 tax. Johnny would now pay $6,000, and Jimmy would now pay $16.000.

Companies also should only pay the same as individuals so people don’t need to create a company just to avoid paying less tax, and companies don’t take their productivity and job opportunities to nations which aren’t trying to greedily gouge the rewards of their efforts.

All this means there are more jobs, less people on welfare, less need for governments to give people money, and more productivity which than gets taxed at a low and “fair” rate, creating more real revenue for the government.

If the tax rate was 100%, who would volunteer for overtime? What’s 100% of nothing?

There is a very real point at which higher taxes actually reduce government income. A dumb government will then increase taxes yet again, not knowing that’s why they’re actually getting less income, meanwhile they also need to pay more welfare because nobody has any money to pay for themselves.

That’s all for now. Back to marriage!

For more information on how this works, read about the Laffer Curve here.