But there are diminishing returns which is not exactly motivating. The way to think about it is, imagine you would work 20% harder, but instead of 20% extra take home money you only get 10%. And it gets more skewed progressively which discourages trying hard at some point. People just stop trying as they don't see the reward as good enough for working harder.
Evidence doesn't seem to suggest that higher earners "stop trying", but above a surprisingly low threshold it's cheaper to pay someone to organise your tax affairs for you and move your money through various loopholes to (legally) avoid paying taxes.
Any government plans to "tax the rich" end up hitting the people just below this threshold the hardest (usually small business owners) while multimillionaire corporate CEOs with various offshore holding companies continue to not pay their fair share.
Ok but that kind of proves my point. They are avoiding taxes and using loopholes and tax havens precisely because it is unfair that their tax rate is increasing the more they earn. At least they feel it’s unfair to them. Why not solve the problem by having a simple flat tax? Everybody pays the same amount, let’s say 20%. Then it becomes much easier to come after tax dodgers on moral grounds. They no longer have an excuse of them being unfairly treated as their tax is identical to everybody else.
and yet you have people like Buffett and Gates who say the exact opposite that they should be taxed more. So who is right the other rich people complaining about taxes or Buffett/Gates saying they want more taxes?
"When workers’ earnings rise but their after-tax income rises less—because of increases in their income and payroll taxes or declines in their benefits from government programs—their incentive to work typically declines"
We want to fund things that benefit everyone but whose benefits would not be practical to capture directly, in a way that feels fair or at least fair-ish. What would you suggest?
Governments create money when they spend and then tax it back. It is the point at which taxes are imposed that enable spending. Tax collection is the end of the transaction.
So the constraint on government spending is aggregate spending, not total tax receipts last year.
Armed with this information you can deduce that the government can purchase any output not consumed by the private sector at a fixed minimum price, so long as it doesn't compete with the private sector for the same resources, the most obvious being labour:
Once you have this understanding of how government finance works you can see that the government isn't desperately trying to "raise revenue to fund itself" but rather, needs to ensure it creates sufficient space in the economy to spend without inflation risk.
Most social programs deal with the fringes of the private sector and thus carry no inflation risk, and so long as they're counter cyclical do not need to be "funded" as such.
For everything else, taxing assets, wealth and resource usage will suffice!
