Hey, David.
What happens if we tax the rich, too, much?
Do they leave the country do they stop working?
Okay, so let's deal with this question again.
There's an idea that is sometimes presented which is if you tax the rich, too, much, they
won't work anymore because it won't be worth it for them
to the government takes too much of their money, it's
not worth working or they will simply leave the country.
Let's deal with these one by one.
First of all, if you tax rich people they will leave the country anecdotally shore,
sometimes a rich person changes where they live.
Sometimes it's for reasons related to taxation.
Sometimes it's not.
The truth is, the number of rich people that would leave the United States, if taxes were
somewhat higher.
We're not talking about I'm not at least talking about a 90% marginal tax rate, starting at
a million bucks.
I don't think that there's any evidence that would be good.
The number of rich people who leave the country is relatively small.
It's going to be more or less mathematically in significant remember that most rich people
wanna live in the place where they have community
where their families are, where they speak the
language, sort.Some rich people might leave if you tax them too much but not of the levels
at which studies suggest the richest Americans should
be taxed.
So the leaving the country thing is really quite a big distraction.
Now what about the possibility that if you pack a rich person too, much, they
will stop working.
Here's the thing, you know how they say that first million is the toughest that may or
may not be true, depending on whether you inherited it,
or actually built a business, but the reality is that in the
same way that there's a diminishing marginal utility to money if you have a billion dollars,
another 5 million does very little for you if you
have a dollar, 5 million does a lot for you, there's a
diminishing marginal utility for money.
But for a lot of these super rich people, it's much easier to
build their wealth.
Then it maybe was to get to where they were.
Let me give you an example, if you have a net worth of a billion dollars,
more than likely you can scale up your business 50%Relatively easily compared to starting
a business from scratch, so if you're being taxed for
example, at the 73% marginal tax rate on income above 10 million, that means if you go from
a billion a year in income to 11 billion a year
in income right?
Imagine you grow your business.
100 million, you might pay 73% on that additional
100 million but the relative amount of work that was
required to get that additional hundred million was far smaller than it was to build your
business to its first 100 million.
So there's no question that if you tax the super rich 95% marginal tax rate
above a certain level, that likely would be a disincentive to continue working, if it's
as most studies suggest you wanna top it out around 70 or
73% at very high incomes, it is very unlikely that it will
have a significant effect in terms of getting rich people to abandon work.
And in fact the idea is that balancing everything a top marginal tax rate
around 70% would maximize government revenue.
It accounts for the fact that some people may
actually work less if they find out that their top income
is gonna be taxed at 70%, but even accounting for that it is going to generate the most
revenue for the government.
We can debate whether it's ethical we can debate whether it's fair, I'm fine having
that debate, but to argue that rich people are simply going to leave the country or that
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davidpakmanshow­2020­03­13­commercialfree are going to stop working.
If we put in place something like a 70% top marginal tax rate, it's simply
not backed by the data I've seen, if you have different data I should look at, let me know
and I'm glad to review and change my mind if the data
warrants that.
We have a great bone.
And so for you today, make sure you are signed up for a membership, a joint
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men to come