How a little-known tax change sparked a tech layoff surge

[AnilD]

This is a great example of how second-order effects in policy often get missed in public debate. Everyone focused on AI or pandemic over-hiring, but the tax code quietly changed the entire incentive structure for investing in innovation — and the layoffs reflect that.

 

[gamerk2]

No I don't think you actually understand the point. Greed is not a system, nor a failing component of "U.S. capitalism", it is a human failing that knows no borders. As for "European capitalism", a better description would be government controlled capitalism, which for all practical purposes is a dressed up name for socialism/communism. Couple that with the insane speech laws (particularly England and Germany) and other limits on personal freedoms, and you have the answer as to why it's difficult to fix.
One man's meat is another man's poison.

Disagree; Europe understands the end result of free speech without consequences is a massive negative societal impact. Or put in simpler terms: You can't use another human as your punching bag.

Second, if your economic system fundamentally fails because of human nature...that's not a viable economic system.

 

[Angga B]

Techspot: For cash-strapped firms and those not yet profitable, the result was a sudden and painful increase in tax bills

Also Techspot: Since the start of 2023, the tech industry has shed more than half a million jobs, with some of the biggest names in the industry making substantial cuts.

Does Techspot even try to read the financial bottomlines of those "biggest names" before making this apologetic article?

 

[bclaymiles]

Just because the FairTax plan claims to have safeguards doesn't mean it's the best or only solution. There are plenty of other proposed tax reforms that address different concerns, some might even be more effective. As for alternatives never being implemented, that kind of defeatist attitude isn't helpful. Plenty of major policy changes have happened throughout history, despite initial resistance.

A federal sales tax isn't 'tax reform', its a clean-slate replacement. There's no simple way to implement it gradually or incrementally, without considerable disruptions - to taxpayers, businesses, and to the revenue stream for the treasury. The IRS is entrenched, and has been for more than 100 years; clawing their hands from the purse won't be easy. I consider my opinion a measured one informed by life experience, not a defeatist attitude. And whether defeatist or measured is immaterial; my opinion isn't going to be the crucial penny that tips the scales.

But hey, if miraculously we switch to a federal sales tax a la FairTax - which I believe is the best compromise/blend put forth so far, great. In my opinion, pigs will have wings sooner however.

 

[bclaymiles]

Disagree; Europe understands the end result of free speech without consequences is a massive negative societal impact. Or put in simpler terms: You can't use another human as your punching bag.

Second, if your economic system fundamentally fails because of human nature...that's not a viable economic system.

The 'consequences' of free speech are more free speech. If you don't like what someone says, you speak freely back to those words. You make a counter-argument, as here. Comparing it to a "punching bag" is histrionic and blurs lines. No blows were thrown, no blood, let.

Moving consequences to the material - fines, jail sentences - for saying 'mean' things is backwards and oppressive, and antithetical to a free society.

Note, there have long been material consequences for certain kinds of speech: defamation and calls to violence, most notably. Those thresholds have long been recognized in civil societies, and are reasonable. Someone saying something disgusting about people with X attributes/beliefs/traditions is certainly unpleasant, but it should not be criminalized.

 

[gamerk2]

A federal sales tax isn't 'tax reform', its a clean-slate replacement. There's no simple way to implement it gradually or incrementally, without considerable disruptions - to taxpayers, businesses, and to the revenue stream for the treasury. The IRS is entrenched, and has been for more than 100 years; clawing their hands from the purse won't be easy. I consider my opinion a measured one informed by life experience, not a defeatist attitude. And whether defeatist or measured is immaterial; my opinion isn't going to be the crucial penny that tips the scales.

But hey, if miraculously we switch to a federal sales tax a la FairTax - which I believe is the best compromise/blend put forth so far, great. In my opinion, pigs will have wings sooner however.

The problem with a sales tax is it hurts the middle class disproportionately. So what would inevitably happen is certain things would get exempt, which immediately sabotages the entire effort. You also have the secondary problem that any type of recession (or even minor economic disruption) would disrupt government revenue far more then an income tax would, and remember the best way to fight economic slowdowns is increased government spending; see the issue there?

The simplest tax solution is surprisingly simple: Remove *all* deductions, lower tax rates for the lower/middle classes to compensate, and raise taxes on individuals and companies that are making millions/billons of dollars. As part of economics course in college I made a similar proposal, and was able to give ~80% of individuals a tax cut while raising an additional 450-500 Billion in additional revenue (mainly through companies like Apple actually paying taxes). Its a shockingly *easy* solution, but it's not politically acceptable so will never happen.

 

[gamerk2]

The 'consequences' of free speech are more free speech. If you don't like what someone says, you speak freely back to those words. You make a counter-argument, as here. Comparing it to a "punching bag" is histrionic and blurs lines. No blows were thrown, no blood, let.

Moving consequences to the material - fines, jail sentences - for saying 'mean' things is backwards and oppressive, and antithetical to a free society.

Note, there have long been material consequences for certain kinds of speech: defamation and calls to violence, most notably. Those thresholds have long been recognized in civil societies, and are reasonable. Someone saying something disgusting about people with X attributes/beliefs/traditions is certainly unpleasant, but it should not be criminalized.

You know what is also oppressive? Individuals who come to power by rabble rousing and blaming everyone's problems on some segment of society, then actively acting against them to show the people you are following through on your promises.

Look at every Democracy that fell to dictatorship and you see the same thing over and over again: Individuals rise to power by blaming gays, minorities, niche religious group, or immigrants for everyone's problems, then aggressively acting against them once in power to maintain that illusion of "progress" and control. And when anyone criticizes those actions, call the criticism an "attack on personal freedoms".

That's why most other countries take a harder line against that form of speech, because they lived through the consequences of *not* doing so.

 

[TheBigT42]

Yes, the U.S. has faced economic ups and downs since the 1970s, but it's remained number one for a reason, its innovation, economic strength, and global influence.

While the national debt is a serious concern, the country has consistently shown resilience and adaptability. History proves that empires evolve rather than collapse overnight.

And it take more than one party to create all of that Dept. They both have F'd us up.

 

[Loadedaxe]

And it take more than one party to create all of that Dept. They both have F'd us up.

I didn’t say that either party was responsible, but you're right, no one is immune to the missteps that have been made or are still happening.

What can be said, though, is that the current system isn’t working. What are the solutions? Well, if we knew that, we wouldn’t be discussing this on gamer forums. As for those who argue that safeguards are in place, that perspective is both obtuse and naive.

Repeating the same things over and over expecting different results is called insanity.

 

[Loadedaxe]

The problem with a sales tax is it hurts the middle class disproportionately. So what would inevitably happen is certain things would get exempt, which immediately sabotages the entire effort. You also have the secondary problem that any type of recession (or even minor economic disruption) would disrupt government revenue far more then an income tax would, and remember the best way to fight economic slowdowns is increased government spending; see the issue there?

The simplest tax solution is surprisingly simple: Remove *all* deductions, lower tax rates for the lower/middle classes to compensate, and raise taxes on individuals and companies that are making millions/billons of dollars. As part of economics course in college I made a similar proposal, and was able to give ~80% of individuals a tax cut while raising an additional 450-500 Billion in additional revenue (mainly through companies like Apple actually paying taxes). Its a shockingly *easy* solution, but it's not politically acceptable so will never happen.

I can see your point here, and the issue of exemptions definitely complicates things. However, some argue that a well designed sales tax could offset its impact on the middle class through targeted rebates or reductions on necessities.

As for the volatility in revenue, that’s a legitimate drawback.....especially in downturns where consumer spending dips. That said, isn’t part of the problem that government spending is already out of hand, even in stable times? If spending remains unchecked, no tax system will truly solve the underlying issues, no matter what is done.

Maybe something more balanced, where spending is somehow managed alongside tax reform.......could address both revenue stability and economic slowdowns more effectively.

 

[Loadedaxe]

You know what is also oppressive? Individuals who come to power by rabble rousing and blaming everyone's problems on some segment of society, then actively acting against them to show the people you are following through on your promises.

Look at every Democracy that fell to dictatorship and you see the same thing over and over again: Individuals rise to power by blaming gays, minorities, niche religious group, or immigrants for everyone's problems, then aggressively acting against them once in power to maintain that illusion of "progress" and control. And when anyone criticizes those actions, call the criticism an "attack on personal freedoms".

That's why most other countries take a harder line against that form of speech, because they lived through the consequences of *not* doing so.

This is a pattern that's been repeated throughout history, and there's no denying that scapegoating certain groups has been a powerful political tool for political figures.

But ..... that raises the million dollar question, where do we draw the line between protecting against harmful rhetoric and preserving free speech? While many countries take a harder stance against inflammatory speech, others argue that restricting it can set a dangerous precedent for limiting dissent in general.

I am sure we can all agree, the balance between preventing oppression and maintaining open dialogue is a constant struggle, and history has shown the risks of both extremes.

Like many, I am so sick of hearing, "You're stepping on my free speech", as if that phrase alone justifies anything and everything.

 

[BadThad]

As for alternatives never being implemented, that kind of defeatist attitude isn't helpful. Plenty of major policy changes have happened throughout history, despite initial resistance.

He has a point based on history. However, Trump has shown that government "business as usual" can be disrupted

The 'consequences' of free speech are more free speech. If you don't like what someone says, you speak freely back to those words. You make a counter-argument, as here. Comparing it to a "punching bag" is histrionic and blurs lines. No blows were thrown, no blood, let.

Moving consequences to the material - fines, jail sentences - for saying 'mean' things is backwards and oppressive, and antithetical to a free society.

Note, there have long been material consequences for certain kinds of speech: defamation and calls to violence, most notably. Those thresholds have long been recognized in civil societies, and are reasonable. Someone saying something disgusting about people with X attributes/beliefs/traditions is certainly unpleasant, but it should not be criminalized.

HERE HERE!!! Exactly, the UK has speech police that will come to your house and arrest you for "hate speech", the most Orwellian BS I've ever seen/heard.

 

[gamerk2]

I can see your point here, and the issue of exemptions definitely complicates things. However, some argue that a well designed sales tax could offset its impact on the middle class through targeted rebates or reductions on necessities.

As for the volatility in revenue, that’s a legitimate drawback.....especially in downturns where consumer spending dips. That said, isn’t part of the problem that government spending is already out of hand, even in stable times? If spending remains unchecked, no tax system will truly solve the underlying issues, no matter what is done.

Maybe something more balanced, where spending is somehow managed alongside tax reform.......could address both revenue stability and economic slowdowns more effectively.

There's way to address it, but a lot of them involve severley limiting Congresses power to spend.

First thing to remember: A deficit itself is not necessarily a bad thing. Even in peaceful times, what matters is you grow GDP faster then you pile up debt. In recessions, spending is the easiest most cost effective way to get economic growth back on it's feet. And in war...no one cares. Simply saying "pass a balanced budget no matter what" causes much more dire economic problems long term.

What I would personally do, at a high level, is that during non-war/non-recessionary periods, the deficit would be limited to no more then the previous years GDP growth. IE: If GDP grew by 2.5%, then the deficit for the following year would be limited to 2.5% at most. [And to get around things like "The War On Terror" which is still ongoing, Congress would also be required to re-authorize any ongoing wars once per Congressional session.]

Next, I start with the easy fixes the would save a couple hundred billion per, such as allowing the government to negotiate Medicare drug prices. [Seriously, that one change, assuming we get prices similar to Canada, would save somewhere between 300/400 Billion per year. But "something something Socialism bad"]

The problem right now is that dogma is king, and the least politically bad option is often "do nothing".

 

[Loadedaxe]

There's way to address it, but a lot of them involve severley limiting Congresses power to spend.

First thing to remember: A deficit itself is not necessarily a bad thing. Even in peaceful times, what matters is you grow GDP faster then you pile up debt. In recessions, spending is the easiest most cost effective way to get economic growth back on it's feet. And in war...no one cares. Simply saying "pass a balanced budget no matter what" causes much more dire economic problems long term.

What I would personally do, at a high level, is that during non-war/non-recessionary periods, the deficit would be limited to no more then the previous years GDP growth. IE: If GDP grew by 2.5%, then the deficit for the following year would be limited to 2.5% at most. [And to get around things like "The War On Terror" which is still ongoing, Congress would also be required to re-authorize any ongoing wars once per Congressional session.]

Next, I start with the easy fixes the would save a couple hundred billion per, such as allowing the government to negotiate Medicare drug prices. [Seriously, that one change, assuming we get prices similar to Canada, would save somewhere between 300/400 Billion per year. But "something something Socialism bad"]

The problem right now is that dogma is king, and the least politically bad option is often "do nothing".

You make a lot of sense. Deficits, when managed responsibly, can be powerful tools for economic stability and growth. Tying deficit limits to GDP growth offers a smart way to balance fiscal discipline with necessary spending flexibility.

And requiring Congress to reauthorize wars ensures accountability, too often, prolonged conflicts continue with little oversight.

The Medicare drug price negotiation issue is baffling. The potential savings are enormous, yet entrenched ideological resistance keeps a common sense reform off the table. It’s frustrating how political dogma blocks pragmatic solutions that could benefit the economy and everyday Americans.

One of the biggest obstacles to meaningful reform is the influence of money in politics. Kickbacks and lobbying ensure that many politicians are more beholden to special interests than to the needs of their constituents. Until there’s real accountability and transparency in campaign financing and policymaking, even the best ideas can get buried under corporate influence. Who knows.

I agree with you 100%, the biggest hurdle isn’t a lack of viable solutions, but a system that prioritizes political convenience over effective governance. Shifting the conversation toward practical, economically sound decision making is the real challenge.

Of course, politicians will tell you they’ve got it all figured out.....because nothing says "expertise" like refusing to listen to economists, ignoring basic math, and pretending everything is fine while the debt piles up.

 

[bclaymiles]

The problem with a sales tax is it hurts the middle class disproportionately. So what would inevitably happen is certain things would get exempt, which immediately sabotages the entire effort. You also have the secondary problem that any type of recession (or even minor economic disruption) would disrupt government revenue far more then an income tax would, and remember the best way to fight economic slowdowns is increased government spending; see the issue there?

The simplest tax solution is surprisingly simple: Remove *all* deductions, lower tax rates for the lower/middle classes to compensate, and raise taxes on individuals and companies that are making millions/billons of dollars. As part of economics course in college I made a similar proposal, and was able to give ~80% of individuals a tax cut while raising an additional 450-500 Billion in additional revenue (mainly through companies like Apple actually paying taxes). Its a shockingly *easy* solution, but it's not politically acceptable so will never happen.

It appears you haven't read up on the structure of the FairTax solution. It does not hurt the middle class, or the poor, disproportionally.

I vehemently disagree that increased government spending is the "best solution" to an economic slowdown. The government printing more money just dilutes the value, and more importantly, adds the the US's staggering debt.

It never hurts to point out that the top 1% are responsible for about 45% of federal revenues. The top 10% are responsible for about 72%. The whole 'the rich don't pay their fair share is a ludicrous construct, designed to pit different socioeconomic groups against each other.

The rich pay the overwhelming majority of taxes. The super rich pay a hefty amount too - it's just that it's not _income_ in terms of a paycheck, it's taxes on capital gains etc, so it's easy to say 'xyz paid little/no income tax' while obscuring how much they pay in other terms.

 

[bclaymiles]

You know what is also oppressive? Individuals who come to power by rabble rousing and blaming everyone's problems on some segment of society, then actively acting against them to show the people you are following through on your promises.

Look at every Democracy that fell to dictatorship and you see the same thing over and over again: Individuals rise to power by blaming gays, minorities, niche religious group, or immigrants for everyone's problems, then aggressively acting against them once in power to maintain that illusion of "progress" and control. And when anyone criticizes those actions, call the criticism an "attack on personal freedoms".

That's why most other countries take a harder line against that form of speech, because they lived through the consequences of *not* doing so.

That's quite the conflation you've got there. It'd be a shame if it were based on fallacies.

Dictators come to power through naked, brute, force, not by what citizens have to say. Hitler _consolidated_ his powers after taking control by demonizing non-'aryans', the 'defective', etc.. That was _Hitler's_ use of speech, not The People's use of speech. Those who spoke out about the nazis - you know, german citizens speaking freely against the Reich - enjoyed an exceptionally brief life after opening their mouths.

The funny thing is, you make my argument for me: "And when anyone criticizes those actions, call the criticism an "attack on personal freedoms"."

Semi-correct. Totalitarians stifle free speech, because with it comes criticism, and a threat to their hegemony. The People sowing doubt about oppressors is never tolerated. Which is why unfettered free speech for The People (within common sense limits, like you can't say 'I/We should kill the jews') is the sine qua non of a free people.

 

[bclaymiles]

And it take more than one party to create all of that Dept. They both have F'd us up.

Agreed. I lean pretty conservative, but the worst are 'conservative' members of the House in congress. They're closest to their local people; therefore, they do everything in their power to divert federal spending towards pork-barrel projects to benefit their local constituents. Granted, liberals do the same, but they mostly go towards 'national' pork-barrel, so the individuals can hide behind that. The 'conservative' ones just stay under the radar, because in a trillion dollar budget, who is going to notice a bridge to nowhere in Alaska?

 

[bclaymiles]

I can see your point here, and the issue of exemptions definitely complicates things. However, some argue that a well designed sales tax could offset its impact on the middle class through targeted rebates or reductions on necessities.

As for the volatility in revenue, that’s a legitimate drawback.....especially in downturns where consumer spending dips. That said, isn’t part of the problem that government spending is already out of hand, even in stable times? If spending remains unchecked, no tax system will truly solve the underlying issues, no matter what is done.

Maybe something more balanced, where spending is somehow managed alongside tax reform.......could address both revenue stability and economic slowdowns more effectively.

And I think it boils down to a rather terse statement: "Nothing is perfect". Which is to say, there's no perfect taxation system, no perfect economy, no perfect society where every belly is full and everyone has a roof over their head.(*)

The best we can do is work towards the best compromise, that benefits the most people and is a detriment to the fewest.

(*) In micro-economies, very near-perfection can be achieved, random example, Luxembourg. The problem is that systems almost always fail at scale.

 

[bclaymiles]

First thing to remember: A deficit itself is not necessarily a bad thing. Even in peaceful times, what matters is you grow GDP faster then you pile up debt. In recessions, spending is the easiest most cost effective way to get economic growth back on it's feet. And in war...no one cares. Simply saying "pass a balanced budget no matter what" causes much more dire economic problems long term.

What I would personally do, at a high level, is that during non-war/non-recessionary periods, the deficit would be limited to no more then the previous years GDP growth. IE: If GDP grew by 2.5%, then the deficit for the following year would be limited to 2.5% at most. [And to get around things like "The War On Terror" which is still ongoing, Congress would also be required to re-authorize any ongoing wars once per Congressional session.]

Next, I start with the easy fixes the would save a couple hundred billion per, such as allowing the government to negotiate Medicare drug prices. [Seriously, that one change, assuming we get prices similar to Canada, would save somewhere between 300/400 Billion per year. But "something something Socialism bad"]

The problem right now is that dogma is king, and the least politically bad option is often "do nothing".

Deficits presage debt. Obviously, sometimes deficits can become a surplus, it cancels out the deficit, and Bob's your uncle. The problem is, the US has had a surplus - and a rather limp one at that - once in the last thirty years, and many years before that. The only way to address debt is to stop all deficit spending, and start paying down.

Kind of like what individuals do when they have a credit card with a limit. The US Treasury's credit card has no limit. Which is why every single one of the 114 million taxpayers in the US owes $323,000.

 

[BobHome]

Way to go America. Yup, R&D is so old school, right? BUT, don't worry, there's a huge R&D budget in China.
(Oh, wait! Tariffs. I guess the rest of the world will advance on their innovations.)

 

[gamerk2]

It appears you haven't read up on the structure of the FairTax solution. It does not hurt the middle class, or the poor, disproportionally.

Yes, it does, because it after factoring in the percentage of their income that gets spent on goods and services, you find a sales tax eats a larger percentage of their overall income.

I vehemently disagree that increased government spending is the "best solution" to an economic slowdown. The government printing more money just dilutes the value, and more importantly, adds the the US's staggering debt.

Only if you look at the problem from a purely budgetary perspective.
Here's a classic example: Unemployment benefits show up as a multi-billion dollar loss on the governments balance sheet every single year. But every single study that researches the economic impact of unemployment payments show the same result: when there is a recession, that money keeps enough people in the economy (EG: Spending money) that it prevents a cascade effect (EG: Job losses leading to a loss of spending in the local economy, leading to more job losses) large enough where the income collected by income taxes directly because of unemployment offsets its cost. In simpler terms: unemployment payments actually turn an indirect profit through reduced job losses and increased tax collection.

The point being: The solution to an economic slowdown is *not* to farther slow down the economy. You're supposed to spend like mad during recessions/depressions to keep people employed and get the economy moving again, at which point you reduce spending. Case in point: Biden did in 9 months what it took Bush/Obama 9 years to do after the great recession. And before you say "inflation", the US did better on inflation then every other western economy (other then arguably France), while having a faster COVID economic recovery. And I argued at the time (and now) the Fed has gotten far to used to the mindset that 0% interest rates are normal (they aren't) and were thus too slow raising rates, but that's a separate economic argument entirely.

It never hurts to point out that the top 1% are responsible for about 45% of federal revenues. The top 10% are responsible for about 72%. The whole 'the rich don't pay their fair share is a ludicrous construct, designed to pit different socioeconomic groups against each other.

Your numbers seem just a little off:

Summary of the Latest Federal Income Tax Data, 2024 Update

The Tax Cuts and Jobs Act (TCJA) made many significant, but temporary, changes to the individual income tax code to lower tax rates, widen brackets, increase the standard deduction and child tax credit, and more.

taxfoundation.org

Regardless: That's the point of a graduated income tax rate: The wealthy *Should* pay a disproportionate amount in taxation, because it's by far the least bad economic solution. A "fair" tax may be fair from a purely ethical perspective, but it's bad economic policy to implicitly raise taxes on those who are already economically imperiled, which makes *everyone* economically worse off as a result. Or are you going to seriously argue that someone making $40k a year should pay significant (if any) income tax is somehow *good* for the economy?

"Fairness" has no place in government economic policy; the only thing that matters is providing the largest amount of total economic growth at the lowest possible cost. And if that means that Billionaires get the 90% tax bracket restored, then so be it.

The rich pay the overwhelming majority of taxes. The super rich pay a hefty amount too - it's just that it's not _income_ in terms of a paycheck, it's taxes on capital gains etc, so it's easy to say 'xyz paid little/no income tax' while obscuring how much they pay in other terms.

For this discussion I'm talking purely on income taxes and not alternative tax receipts. Regardless, my stance on Income taxes is simple: Remove all deductions, simplify the structure, and make it so the bill reduces down to "You make X, you pay Y, sign this form if you agree". I'd also tax Capital Gains at the same rate as all other forms of income; income is income is income. If you want to encourage some form of economic activity, do it some other way other then the tax code.

Other taxes can (and should) also be levied as economically necessary. Simple example: Gas taxes pay for road maintenance (although obviously this one will need a rethink going forward).

 

[gamerk2]

Deficits presage debt. Obviously, sometimes deficits can become a surplus, it cancels out the deficit, and Bob's your uncle. The problem is, the US has had a surplus - and a rather limp one at that - once in the last thirty years, and many years before that. The only way to address debt is to stop all deficit spending, and start paying down.

Kind of like what individuals do when they have a credit card with a limit. The US Treasury's credit card has no limit. Which is why every single one of the 114 million taxpayers in the US owes $323,000.

What you want is economic suicide.

Debt is good; it's how you drive economic activity. What's *bad* is accumulating debt faster then your income can compensate for it.

Simple example: The US turned exactly zero budgetary surpluses between Truman and Cater. When Truman took over, the US Debt/GDP ratio stood around 150%, which is obviously bad. By the end of Carter, it was down to 32.1% despite never once turning a surplus. Why? Economic Growth.

Put a simpler way: If you have $1 Million in debt, that's a very bad thing because you do not make anywhere enough money to cover it. Your Debt/Income is probably at least 1000%, which is very very bad and can easily lead to a death spiral due to debt repayments. But if a multi-billionaire has $100 Million in debt? He can basically ignore it because the payments are tiny relative to the income brought it; if anything you keep spending money to drive more income growth.

Put another way: What you want if a government that buys a house in cash, because you don't want the debt associated with a mortgage. It sounds stupid, because it is.

 

[bclaymiles]

Yes, it does, because it after factoring in the percentage of their income that gets spent on goods and services, you find a sales tax eats a larger percentage of their overall income.

I would only argue that _maybe_ it does. Extrapolating (non-existent) results for a system never implemented tends to turn into a wormhole of speculation. Any national/federal sales tax would likely go through fits and starts and adjustments. And it would take years. This is the main reason I doubt one will ever be implemented, the disruption would be massive. Well, maybe it would be. It's never been done here, so this is just more random speculation.

Only if you look at the problem from a purely budgetary perspective.

[elided]

A good analysis. I learned something. Shocker, someone on the internet openly admitted they learned something! I'd suggest though that it means those states that are in the red on unemployment benefits need to increase the withholding. Unemployment insurance being a state matter, it has to be tailored to the individual states needs.

One of the larger state-level problems - well, it holds nationally too - is the general 'slush fund' nature of budgets. 'Here's all the money we have, now we can spend it on whatever we want'. taxes need to be apportioned and spent with better controls. Heck that even applies at the local level. Govt has a gross tendency to spend without regard for both a) how much they have and b) what it should go to. Just look at California's "High speed rail" system. The cost estimate in 2008 when it started was $33 billion. It's 2025, not a single inch of rail has been laid after $23 billion spent, and the estimate - just for 'phase 1' - is now estimated up to $128 billion. It is reckless spending.

Your numbers seem just a little off:

Summary of the Latest Federal Income Tax Data, 2024 Update

The Tax Cuts and Jobs Act (TCJA) made many significant, but temporary, changes to the individual income tax code to lower tax rates, widen brackets, increase the standard deduction and child tax credit, and more.

taxfoundation.org

Yes, as you say, just a little.

45% vs 45.8% for the top 1%, and 72% vs 75.8% for the top 10%. The numbers vacillate between various extremes every year.

Regardless: That's the point of a graduated income tax rate: The wealthy *Should* pay a disproportionate amount in taxation, because it's by far the least bad economic solution. A "fair" tax may be fair from a purely ethical perspective, but it's bad economic policy to implicitly raise taxes on those who are already economically imperiled, which makes *everyone* economically worse off as a result. Or are you going to seriously argue that someone making $40k a year should pay significant (if any) income tax is somehow *good* for the economy?

That's fine, but my point is that the endless heckling that 'The rich don't pay their fair share' is utter nonsense, by any meaningful metric. They already pay a vastly disproportionate share of tax revenues.

"Fairness" has no place in government economic policy; the only thing that matters is providing the largest amount of total economic growth at the lowest possible cost. And if that means that Billionaires get the 90% tax bracket restored, then so be it.

Fairness is extremely important in government policy. Fairness is core to ethics, justice, equality. 'At the lowest possible cost' would argue against our current system of the govt spending far more than it takes in. The lowest cost to the taxpayers - the ones who fuel the engine of the economy, not the government - argues for lower taxes, not higher. On everybody.

That 90% bracket, while not apocryphal, affected something on the order of eleven people in the US during the time it was in place. The bracket existed, it had no meaningful effect on tax revenues.

For this discussion I'm talking purely on income taxes and not alternative tax receipts. Regardless, my stance on Income taxes is simple: Remove all deductions, simplify the structure, and make it so the bill reduces down to "You make X, you pay Y, sign this form if you agree". I'd also tax Capital Gains at the same rate as all other forms of income; income is income is income. If you want to encourage some form of economic activity, do it some other way other then the tax code.

Part of the rationale for lower taxes on cap gains is to offset the risk inherent in The Largest Gambling Operation on earth - the stock market. As ETFs and mutual funds have exploded in numbers - my brokerage offers more than 10,000 off them - along with index funds having taken hold, the overall risk has been reduced and spread out, so maybe higher rates would be appropriate. However, I don't think the federal government needs even more tax revenue.

As far as deductions, the idea behind many is, shockingly, for fairness, to level the playing field, though a lot is that silly government 'encouragement' mentality - offset mortgage interest with a deduction, to encourage home ownership, which promotes economic stability and community investment. However, it's gradually become clear that all these individual deductions are stupid, so they've just consolidated them into a huge standard deduction. So why not just change the rates so that a goofy 'standard deduction' isn't necessary??

 

[bclaymiles]

What you want is economic suicide.

Debt is good; it's how you drive economic activity. What's *bad* is accumulating debt faster then your income can compensate for it.

Simple example: The US turned exactly zero budgetary surpluses between Truman and Cater. When Truman took over, the US Debt/GDP ratio stood around 150%, which is obviously bad. By the end of Carter, it was down to 32.1% despite never once turning a surplus. Why? Economic Growth.

Put a simpler way: If you have $1 Million in debt, that's a very bad thing because you do not make anywhere enough money to cover it. Your Debt/Income is probably at least 1000%, which is very very bad and can easily lead to a death spiral due to debt repayments. But if a multi-billionaire has $100 Million in debt? He can basically ignore it because the payments are tiny relative to the income brought it; if anything you keep spending money to drive more income growth.

Put another way: What you want if a government that buys a house in cash, because you don't want the debt associated with a mortgage. It sounds stupid, because it is.

The debt to GDP ratio during Truman's term was the result of a massive burst of spending to support a war effort. What we have now is entirely different. We have a debt to GDP ratio of at least 124%. It is not the result of a burst of spending in order to support a war effort. It briefly spiked due to the massive covid spending, but is back to rising. It is an accumulation of debt that exceeds GDP, but not in response to some externality, it's due to overspending.

See the graph here:
US debt expected to keep growing
Look at the low point at the start before the war, to the peak ratio in 1945-ish. Then look at the low in the seventies, and how it's growing like an insidious mold in the bathroom that you can't stop from spreading. Not in response to an emergency. Only crazy-*** spending.

When I mentioned 'paying down the debt' I was not putting forth some crazy notion of reaching zero. I'm talking getting CONTROL of the debt and not continuing to accumulate it to the insane 124% of GDP that it is now. This isn't thoughtful spending. It's buying a Gucci bag while living in your car.