Originally, this article was published without this addendum and was met with some criticism on social media. There were two sorts of objections. The first was simply, “Where is the data and evidence to substantiate these claims?” or “What are you talking about?” The second sort of objection, coming from policy wonks and tax experts, suggested that my analysis is wrong. This addendum should address all such objection and clear some things up.
More Info on Marginal Income Tax Rates on Top Brackets
High top marginal income tax rates effectively serve as a maximum wage and induce corporations to spend a greater portion of their excess profits on paying their workers better wages rather than on paying senior executives more.
The American income tax system is a progressive system with marginal rates. I’ll start by explaining how such a system works. Suppose you have a marginal tax rate of 5% that kicks in at an income of $30,000 per year, a rate of 10% that starts at $50,000 per year, and a rate of 15% that starts at $100,000, and a rate of 70% that kicks in at $10,000,000 per year. A person earning $10,100,000 per year would not pay a ridiculous $7,070,000 as lying pundits at Fox News would have you believe, but would rather pay $1,561,000 total in income taxes, which is an effective rate of closer to 15% — the 70% rate only applies to the last $100,000 earned.
The following charts show our theoretical tax brackets and how much people would have to pay at various different income levels.