Tuesday, January 24, 2012

Mirror of Grubsdnal

From the comments on Landsburg's post discussed in my previous post:

Steve’s mirror world shows that Mitt pays 40% of what would have been his income in Timm’s tax free world, but it also provides a handy tool for exploring other revenue structures. Suppose the taxmen of Mitt’s world distributed the tax burden somewhat differently – instead of 35% of salary and and 15% of investment income, they might (crudely) try to maintain revenue by making the charge 50% of salary and 0 % of investment income. That would wind up costing Mitt 50% of his total income.

Hmmm? Maybe it’s not investment tax that’s hurting his bottom line. Suppose we reverse the tax rates to 0% of salary and 50% ofinvestment income. In that case he only pays 25% of his Timm world income. That makes it look like it’s tax on salaries that really hurts the saver.

Am I missing something?

I doubt it.