Re:On the Experience of Being Poor-Ish, for People Who Aren't
by bzbarsky on Monday March 01, 2021 @03:21PM
(#26307873)
Inheritances are not taxable (for the recipient), but IRS data shows similar patterns.
What it really comes down to is that the upper tail of the "reliable income" distributions is thin enough that a large fraction of the people who end up in various "top N%" buckets are there due to various windfalls, lumpiness of income (e.g. a writer getting an advance that they live on for a few years while writing the book), etc, etc.
Which is, by the way, why the way we do progressive taxation is a bit weird. Progressive taxation with tax brackets based on lifetime earnings, as opposed to current-year income, would make a lot more sense in some ways...
Re:On the Experience of Being Poor-Ish, for People Who Aren't
by TimPC on Wednesday March 10, 2021 @02:11PM
(#26414872)
As much as at first blush progressive taxation based on lifetime earnings might seem fairer, it has extremely dangerous consequences. Having your tax bracket go up throughout your life creates major complications in saving for retirement (and extracting deferred income from retirement savings) which is enough to make the idea wildly impractical in my view.
The other misleading thing is it looks at 44 years of longitudinal data, and doesn't make corrections for differences between the early years and later years. Income has become more polar in the last 40 years, so the current numbers are a fair bit worse than the average numbers of the last 4.4 decades.