Instead of the usual progressive system where your tax rate goes up as you make more money, imagine an inverse version: the lower your income, the higher your marginal tax rate. As you earn more and climb the ladder, your rate drops.
So the first $50k might get taxed at 35-37%, the next $50k at 25%, and anything over $150k or $200k drops down to 10-15%. The harder you grind and the more you increase your market value, the bigger the reward on every extra dollar.
The incentive angle:
• Every overtime shift, raise, side hustle, or skill upgrade doesn’t just give you more gross pay — it literally puts you in a much lower tax bracket.
• That extra hour or certification suddenly becomes way more valuable because you keep a much larger chunk of it.
• It turns the entire tax code into a rocket booster for upward mobility: the system screams “go earn more” at every level instead of quietly taxing your success harder the more you succeed.
No penalties for doing well. Instead, massive built-in rewards for pushing yourself further. Roughnecks, truckers, tradespeople, entrepreneurs… everyone grinding would feel it immediately.
What do you think, would this actually get more people working harder and advancing?
What if we had an inverse progressive tax?
byu/justsignuptodownvote inAskEconomics
Posted by justsignuptodownvote
1 Comment
1. This is (roughly) how the earnic income tax credit (EITC) works, although the EITC is a tax credit/subsidy, and not a regressive income tax. [One disadvantage ](https://eml.berkeley.edu/~saez/course/rothsteinAEJ10.pdf) of this is that while it does increase labor supply, employers are able to capture a large portion of the tax credit.
2. Your analysis is not necessarily wrong, but it is incomplete.
A higher wage means that’s leisure becoles more expensive and a worker will want to work more. This is called the substitution effect.
However, a higher wage allows a worker to afford the same consumption as before while working less hours. This means the worker will want to less. This is called the income effect.
If the the income effect is larger than, *dominates*, the substitution effect, an increase in wages leads to a decrease in labor supply, and vice versa.
Comparing the income and substitution effects at different incomes and graphing the effect on labor supply gives you the
[labor supply curve](https://en.wikipedia.org/wiki/Backward_bending_supply_curve_of_labour)