A random thought here, and not something I'd necessarily support. However, while typing up another thread this thought came to me.
Currently the Tax Brackets work that whatever your total income is, that's the bracket you're put in. One of the reasons some conservatives argue against having an exceptionally high "top" tax bracket is that you get to a point (if the other brackets stay lower) where it may be more beneficial to make LESS money because the top bracket tax is so high it ends up losing them money. Take for example our current tax brackets.
1. 0 - 8.5k = 10%
2. 8.5k - 34.5k = 15%
3. 34.5k - 83.6k = 25%
4. 83.6k - 174.4k = 28%
5. 174.4k - 379.2k = 33%
6. > 379.2k = 35%
Currently, if we doubled the top tax rate from 35% to 70% we'd have a situation where someone making $400k a year would actually make less take home money than someone making $200k a year.
However, what if instead we said that your bracket isn't determined by your total income but rather each bracket is taxed at its amount. IE someone making 40K would have the first 8.5 taxed at 10%, the 26k taxed at 15%, and the last 5.5k taxed at 25%.
And what if we changed the tax brackets then so that Bracket 4 had a rate of 30%, bracket 5 had a rate of 40%, and bracket 6 had a rate of 70%.
Lets compare some numbers under the new and old system.
40k a year ..... Old System $10k ..... New System $6,125
120k a year ... Old System $33.6k ... New System $27,945
250k a year ... Old System $82.5k ... New System $74,505
500k a year ... Old System $175k .... New System $210,745
1 Mil a year ... Old system $350k ..... New System $560,745
So this method would decrease the tax burden on those making under the top tax rate while increasing the burden on those over the top tax rate while at the same time assuring that those who make the most pre-tax will always be making more than someone who makes less than them.
What would peoples thoughts be in regards to that type of system where each bracket of income is taxed at a specific level rather than your entire income being taxed at a single bracket? If we were to raise the top tax bracket, would moving to this type of system be a reasonable compromise between full out raising of the top tax rates or lowering of it?