> Most suggestions of this nature fail to explain how they will deal with the problem of people just seeing there’s no point in trying for more. On a personal level, I’ve heard people from Norway describe this problem for personal income tax—at some point (notably below a typical US senior software engineer’s earnings) the amount of work you need to put in for the marginal post-tax krone is so high it’s just demotivating, and you either coast or emigrate. Perhaps that’s not entirely undesirable, but I don’t know if people have contemplated the consequences of the existence of such a de facto ceiling seriously.

I think if you look at quality of life and happiness ratings in Norway it's pretty clear it's far from "entirely undesirable". It's good for people to do things for reasons other than money.

And the middle ground is to only enforce it on corporations in exchange for the protections given to the owners.

Want to make more? then take personal risk.

Great, so we only want the real high risk takers, the top gamblers,to play in the big league. Those who are so rich they no way to lose their personal comfort and are blind to the personal risk - and probably are careless about anyone's else just as well

Don't we have that already? Bootstrapped startups with the founders money on the line typically don't play in the 'big league's till way after the founder is at risk..

> Great, so we only want the real high risk takers, the top gamblers,to play in the big league

It either takes risk of private capital or future taxpayers' taxes to create big leagues. I'd take the former over the latter.

And I prefer cold committee who measure risk and are committed to some public values. You choose silicone valley, VCs and no public healthcare. I prefer the Norwegian model.

It works great when the innovation happens elsewhere and is freely shared.

Norway is Saudi Arabia with snow.

Their entire economy and society are structured around oil extraction.

There are no lessons to learn from Norway unless you live somewhere that oil does from the ground.

Hardly per capita they export similar amounts of petroleum products, but Norway’s GDP is 80k/person vs 30k/person in Saudi Arabia. Norway exports slightly more/person but their production costs are significantly higher which offsets it.

The difference is Norway’s economy being far less dependent on petroleum which is only 40% of their exports.

We're talking about corporations here, where are they going to go? If you had a competent government, you would say "fine, then leave. But your wealth and business is staying here" at some point the government has to do its job. These corporations pull in trillions of dollars, its wild to me to suggest that suddenly everyone would stop working and making money because they were taxed at a progressive rate. Its an absurd assumption to begin with.

We could literally have high speed rail, healthcare, the best education on the planet and have a high standard of living... and it would be peanuts to them. Instead we have a handful of people with more wealth than 99% of everyone else, while the bottom 75% of those people live in horrifying conditions. The fact that medical bankruptcy is a concept only in the richest country on earth is deeply embarrassing and shameful.

"the amount of work you need to put in for the marginal post-tax krone is so high it’s just demotivating"

Sounds like the effort needed for bonuses here in the US. Why try if the amount is largely arbitrary and generally lower than your base salary pay rate when you consider all the extra hours. Everything is a sham.

Which industry? Bonuses in the tech industry tend to be somewhat arbitrary and thus ineffective for motivating employees. Bonuses in other industries like trading or investment banking tend to be larger (sometimes more than base salary) and directly tied to individual performance and so they're highly effective at motivating ambitious employees.

Increasing marginal income tax rates on highly compensated employees might be a good policy overall. But where are we on the Laffer curve? If we go too far then it really hurts the overall economy.

> the amount of work you need to put in for the marginal post-tax krone is so high it’s just demotivating

This is a cliche you hear from right winger in any country that has a progressive tax system.

Regarding Norway, taxes aren't in the same ballpark as in some US blue states.

Also, it's a very simplistic view to think that people are only motivated by money. Counter examples abound.

> This is a cliche you hear from right winger in any country that has a progressive tax system

Not a cliché - a fact. I'll explain to you.

The incentive structure of progressive taxation is wrong: it only works for the few percent that are extremely money hungry: the few that are willing to work for lower and lower percentage gains.

Everyone else says "enough" and gives up when they have the nice house and a few toys and some retirement money with luck. In New Zealand that is something like USD1.5 million.

I'm on a marginal rate of 39% in New Zealand. I am well off but I literally am not motivated to try and earn anything extra because the return is not enough for the extra effort or risk involved. No serial entrepreneurship for me because it only has downside risk. If I invest and win then 39%+ is taken as tax, but even worse is that if I lose then I can't claim my time back. Even financial losses only claw back against future income - which could move to $0 due to unforeseen events and so the financial risk is more than naively apparent.

Taxation systems do not fairly reward for risk. Especially watch people with no money taking high risks and pay no insurance because the worst that can happen to them is bankruptcy.

New Zealand loses because the incentive structure for a founder is broken. We are an island so the incentive structure should revolve around bringing in overseas income if it is spent within the border. Every marginal dollar brought into the economy helps all citizens.

The incentives were even worse when I was working but was trying to found a company. I needed to invest time, which had the opportunity cost of the wages I wouldn't get as a developer (significant risk that can't be hedged and can't be claimed against tax). 9 times out of 10 a founder wins approximately $0: so expected return needs to be > 10x. A VC fund needs something like > 30x return from the 1 or 2 winning investments. I helped found a successful business but high taxation has meant I haven't reached my 30x yet - chances are I'll be dead before I get a fair return for my risk. I'm not sure I've even reached 10x given I don't know the counterfactual of what my employee income would have become. This is for a business earning good export income.

Incentive structures matter - we understand that for employees - however few governments seem to understand that for businesses.

I'm also on the 39% marginal income tax rate in New Zealand. That income tax rate isn't the problem. Keeping $60K out of every $100K extra salary I make is plenty of motivation to work harder to make the extra $100K... especially because the taxes paid aren't burned, they mostly go to things I care about.

The income tax rate isn't all that relevant to the costs and benefits of starting a company, so I don't understand that part of your story. The rewards for founding a successful company mostly aren't subject to income tax, and NZ has a very light capital gains regime.

I have started my own company and I do agree that there are some issues that could be addressed. For example, it would be fairer if the years I worked for no income created tax-deductible losses against future income.

But NZ's tax rates are lower than Australia and the USA and most comparable nations, and NZers start a lot of businesses, so I don't think that is one of our major problems at the moment.

> Keeping $60K out of every $100K extra salary I make is plenty of motivation to work harder

That's good that it motivates you. It doesn't motivate me any more. I'm not interested in "investing" more time for the reasons I have said.

> the taxes paid aren't burned, they mostly go to things I care about.

I'm pleased for you. I'd like to put more money towards things I care about.

> The income tax rate isn't all that relevant to the costs and benefits of starting a company

I am just less positive than you: it feels like win you lose, lose you lose bigger. I'm just pointing out that our government talks about supporting businesses but I've seen the waste from the repetitive attempts to monetise our scientific academics.

> The rewards for founding a successful company mostly aren't subject to income tax

Huh? Dividends are income. Or are you talking about the non-monetary rewards of owning a business?

> NZ has a very light capital gains regime

Which requires you to sell your company to receive the benefits of the lack of CGT. So every successful business in NZ is incentivised to sell. NZ sells it's jewels. Because keeping a company means paying income tax every year. NZ is fucking itself by selling anything profitable - usually to foreign buyers.

The one big ticket item I would like to save for is my retirement fund. But Labour/Greens want to take 50% to 100% of capital if you have over 2 million. A bullshit low amount drawdown at 4% is $80k/annum before tax LOL. Say investments go up by 6% per year and you want to withdraw 4%. Then a 2% tax is 100% of your gains. Plus I'm certain they will introduce means testing for super before I am eligible. And younger people are even more fucked IMHO. The reality is I need to plan to pay for the vast majority of my own costs when I retire, but I get to pay to support everybody else. I believe in socialist health care and helping our elderly, but the country is slowly going broke and I can't do much about that. I believe that our government will take whatever I have carefully saved - often to pay for people that were not careful (My peer-group is not wealthy so I see the good and the bad of how our taxes are spent). Why should I try to earn more to save?

> It doesn't motivate me any more.

I find it hard to understand how $60K means no motivation but $100K would be highly motivating.

> I'd like to put more money towards things I care about.

You said later that you care about the public health system and helping the elderly. That's where a large percentage of our taxes go.

> Huh? Dividends are income. Or are you talking about the non-monetary rewards of owning a business?

No, I'm talking about selling all or part of the business. I agree with you that it's a problem our businesses often sell out to overseas interests who hollow out the company. But the general pattern of making most of your money by selling shares in the business is completely normal worldwide.

Perhaps "loss aversion" is important to me: I'm not a spherically rational Homo economicus.

Our society mostly works because of our non-monetary rewards, not because of monetary incentives. My teaching and nursing friends work for their own satisfaction, and more money is not a high priority to them.

I am not particularly motivated by money. I suspect you are a businessperson that believes money is strongly motivating? I chased financial success for 15 years when I started from $0: however I now hope I have enough and I hope it won't be unfairly taken from me. Yes, money was a big incentive then (and my personal costs have been very high), but now I have other goals.

I suspect I psychologically find high marginal taxation demotivating (48% if we include GST). Maybe because I have too many acquaintances and family sucking at the government tit. I see where government money goes because I have a wide variety of acquaintances including retirees, elderly, unhealthy, and unemployed. Yeah, I know they are not living the high life (well, maybe my drug-abusing anti-social acquaintances think they are).

> No, I'm talking about selling all or part of the business

Which requires an intense amount of work, and sometimes a significant loss, and usually requires selling 100%... Why should I sell at 4x earnings when I can hold on to the business - even if I don't want it? Taxation has too much influence on my investments because rebalancing across other investments has too high a cost/risk.

> For example, it would be fairer if the years I worked for no income created tax-deductible losses against future income.

Hard to avoid cheaters.

A policy could be that the government could pay for 2 years of current salary and you only get one chance per person -- however I can't imagine how the government could get that into the budget.

The policy I implied is be to reward winners with a tax break to offset their risk. Difficult to sell to any voters that don't understand risk/reward or voters that believe business owners are greedy worthless bâtards.

Ha: if the business fails you lose money (the wages you didn't receive), and if the business wins you are taxed: "Privatise the losses, socialise the gains" ;)

I’ve seen a lot of people in European countries and former European colonies decry the high tax rate as a reason for low entrepreneurship and just accepted it as a good enough reason but looking at the numbers and the reasoning specifically here made me start questioning things.

The marginal rate in NZ is 39%!? That’s LOWER than in California, the land of “serial entrepreneurship”, for anyone with a successful startup. Not to mention the US tax rate doesn’t include a myriad of other small taxes that for some reason are not included in that number. On top of having a higher tax rate the average Californian entrepreneur also has to source extremely expensive healthcare.

It sounds more like an excuse to keep doing what you already wanted to do rather than an actual demotivating factor.

Mentioning "myriad of other small taxes" in California just shows your unbalanced bias: NZ has a myriad of other costs that California doesn't.

Sales tax 15%, 91 petrol USD5.34/gallon, means testing for many things, no tax friendly retirement savings (IRAs/ROTHs whatever). Auckland housing is less affordable than San Francisco https://www.visualcapitalist.com/least-affordable-cities-to-...

I pay for private healthcare insurance because I want better outcomes than waiting for years to get urgent surgery. I have seen loved ones literally killed by our healthcare system (unnecessary death - not just normal risks of medicine). Our public health system is good when it works but it has some sharp edges. Although I assume poor NZers are better off than poor Californians for heathcare access.

> It sounds more like an excuse to keep doing what you already wanted to do rather than an actual demotivating factor.

I am telling you that it demotivates me. We don't always know why we think things and I don't have to be perfectly rational. You might be right, but calling it an excuse is extremely rude.

> This is a cliche you hear from right winger in any country that has a progressive tax system.

This ad hominem stuff is very out of place. Why not solely engage with the argument?

Higher taxes is the wrong solution to the very valid problem.

We all recognize that a democracy is the correct method for political decision making, even though it's also obvious that theoretically a truly benevolent dictator can make better decisions than an elected parliament but in practice such dictators don't really exist.

The same reasoning applies to economic decision making at society level. If you want a society whose economics reflects the will and ethics of the people, and which serves for the benefit of normal people, the obvious thing is the democratize economic decision making. That means that all large corporations must be mostly owned by their workers in roughly 1/N fashion, not by a small class of shareholders. This is the obvious correct solution, because it solves the underlying problem, not paper of the symptoms like taxation. If shareholder owned corporations are extracting wealth from workers or doing unethical things, the obvious solution is to take away their control.

Obviously, some workers will still make their own corporations do evil things, but at least it will be collective responsibility, not forced upon them by others.

The alternative is to make consumption the will of the people, so people buy things they want, and from vendors they like.

I think "this isn't free; you pay with ad views and your data is sold" is something that should be on a price tag on services that operate this way, though. It doesn't work if the price isn't clearly advertised.

> but I don’t know if people have contemplated the consequences of the existence of such a de facto ceiling seriously.

One of the second order consequences of progressive taxation is that it increases gross wages for higher earners, as people care about their net pay being larger, not their gross pay.

An extreme example, in the UK the tax rate is an effective 60% between £100k and £120k (ish), so people's salaries get driven through that zone quickly. This obviously means there's less money to give to other people.

Those people are full of shit. I'm Norwegian and a software engineer. Income tax generally tops out at about 46%, if you earn $200k you'll pay around 40%, at $500k you'll pay like 46% or so and it doesnt go much higher than that even if you earn a million dollars (10 million nok).

So the difference between earning a decent salary of $80-100k and a great salary north of $150k isn't much tax-percent-wise. If you make another $1000 you take home about $500.

Also keep in mind we don't have to pay for health insurance, we don't have to pay for our kids to go to school, if we get sick and can't work we have a social security net that will take care of us indefinitely. Norway is a great place to live. The people who complain about taxes are idiots who don't know how good they have it. If you make $200k+ you're living a fucking great life, if you make $400k it's even better. Hell i used to make like $35k and I got by on that. $50k is perfectly liveable. And those people pay like 20-25%.

I'm happy to pay taxes, I'm doing great and I don't even earn that much yet. I expect to nearly double my salary within the next 5ish years. Maybe more than double.

Then you have middle class+ Norwegians with a big house, $100k+ car, sweet boat, cabin in the mountains etc complaining about taxes. Man shut up you're literally top .1% in the world you won the damn lottery.