I think that a 4% hit would be a lot for people making significantly less money.
The utility of each dollar drops the more you have. $1000 would be a massive amount of money to someone making minimum wage. $10000 in a single check might seem like a life changing amount of money for some people. At higher levels of wealth and income, those values would be far less significant. If you were to raise or reduce the salary of a typical Bay Area software developer by $1000, for instance, they probably wouldn’t even notice. And they’re not making $1M per year, either.
The reason we have things like a progressive income is that we can tax someone making $1M per year an extra $40k - as much or more than many individuals make - and it’s not going to seriously affect their spending or saving habits. If we tax someone making $50k an extra $2k, they would feel it.
Imagine if they expanded the tax to everyone making over median income!
A man can dream.
I think that a 4% hit would be a lot for people making significantly less money.
The utility of each dollar drops the more you have. $1000 would be a massive amount of money to someone making minimum wage. $10000 in a single check might seem like a life changing amount of money for some people. At higher levels of wealth and income, those values would be far less significant. If you were to raise or reduce the salary of a typical Bay Area software developer by $1000, for instance, they probably wouldn’t even notice. And they’re not making $1M per year, either.
The reason we have things like a progressive income is that we can tax someone making $1M per year an extra $40k - as much or more than many individuals make - and it’s not going to seriously affect their spending or saving habits. If we tax someone making $50k an extra $2k, they would feel it.
Note that we already pay 5% tax on income. This is effectively a second bracket for higher income