A significant part of the reason why the economy sucks is that there is a disincentive to work harder.
My wife and I were at dinner with some friends a few weeks ago, when one of them mentioned something that to me explains a very significant problem with what is wrong with our economy. He remarked that he had worked a significant amount of overtime in the last week and would rather have time off than be paid for the overtime. He’d rather have the money that would be left after paying all those extra taxes. Our friend is by no means a high bracket taxpayer, but he’d still rather have the time off than the extra money.
The most vitriolic rant I’ve ever heard about our progressive tax system was from a coworker in a call center over 10 years ago. Our employer was short-staffed and therefore offered us a deal. If we agreed to work at least 10 hours of overtime a week, they would pay us double time for all our overtime. His rant was inspired by seeing the tax withholding on his first check that included the overtime. My coworker was far from rich, as he drove a 20+ year old Monte Carlo that looked its age. We both continued working the overtime, and I’m sure we both got nice tax refunds that year, but I’m sure my colleague felt a bit punished by the relatively high taxes.
When a friend of mine was in high school, he dated a girl whose father had passed away. Her mother got a modest check from Social Security every month. Every summer she took several weeks off without pay because for every additional dollar she made, she would lose fifty cents in Social Security. Actually it was a little worse than that because she had to pay Social Security taxes on that dollar, and may have had to pay state or (minimal) federal income tax on that dollar. The woman was by no means rich, because she worked at a mall anchor department store.
If people who are not rich like the ones I describe above notice the disincentive to work harder created by our tax system, how much more likely are those who are richer and are subject to steeper taxes to decline to make the effort to make more money? Higher tax rates don’t help our country’s debt situation if everyone decides not to work as hard, so that they don’t pay them.
Just wanted to let you know that it