Reply #6: Let's not and say we did! A person who makes 20k a year shouldn't be... [View All]

[AP]

...charged the same rate on an additional dollar of income that a person who makes 20 million a year. That dollar is so much more valuable to the lower income person that it wouldn't be fair to value it at exactly the same level as a rich person.

The wealthier you are, the less valuable an additional dollar of income is to you (partly because it becomes easier to make another dollar, and partly because there's so little difference between the life you can enjoy as a 30 millionaire and and 30,500,000-aire, whereas there's a huge difference between the life a $10-aire and a 500,000-aire enjoys). So for the tax burden to be apportioned fairly, the person who has more dollars should pay a little higher marginal rate than the person who has fewer dollars.

Furthermore, wealth from different kinds of activities is more socially valuable, so we should reward it with lower levels of taxation. Work is the most valuable thing a person can do for money, so we should tax income from work at the lowest rates. Wealth from cashing a dividend check is much less valuable, so it makes sense to tax that at a slightly higher rate than work.