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In SpartaNova, there is a flat base income tax rate of 70%. For each year of military service that a (potential) citizen performs, his or her future tax rate is decreased by 10% if the service occurs during peace time and by 15% during wartime if in a non-combat role, and 25% during wartime if in active front-line combat, down to a minimum tax rate of 20%. There is a special exception for special service fighters (i.e. seal teams, and other dangerous jobs like bomb disposal teams), nuclear submariners, air force pilots and higher-level intelligence workers all of which receive an additional cut of up to 5% per year of service, down to a minimum of 10%.

Service is voluntary and standard expected service is 2 years, but a serviceman can elect to serve longer if he or she so desires and is not otherwise blacklisted from the service for some reason. Veterans (a la Heinlein's Starship troopers) also receive the full right to vote (non-veteran residents only vote in local elections). There is no "family" tax rate, and the income of each spouse is taxed according to her service or lack thereof, and dependents lose their tax-dependent shield at age 17, when full 70% income tax (or military service) kicks in.

It follows that most rich people would be strongly incentivized to send their children to serve in the military to diminish their future tax burden. Poor people would have the same incentive, true, but the rich would have a disproportionate amount to gain from diminishing their flat rate.

Would a society where the sons and daughters of the richest all serve (if able) be significantly different from ours? For instance, would the nation be much more careful about declaring war or engaging in what we euphemistically call "kinetic operations"? Do more important implications of this come to mind? Yes, I am aware it would likely be an even more unequal society, but I have never mentioned what the taxes are being spent on, or what the inheritance tax rate is, so perhaps we should remain agnostic on that a little longer.

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Note that the question (bolded text above) is of the yes/no type, thus not an idea generation question. Nonetheless, I welcome examples, if they help justify your positive or negative answer. – Serban Tanasa Jan 26 at 0:05
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What qualifies as "military service" under this formulation? Remember that most of the military is the shaft of the spear (logistics), not the tip (combat) -- I'd make a lousy grunt, but would be more than happy back at a base fixing busted LRUs off of tanks and jets! – Shalvenay Jan 26 at 0:31
    
@Shalvenay, I've edited to clarify. Thanks for reminding me. – Serban Tanasa Jan 26 at 0:36
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How about the firms taxation ? If I a possess a firm which value is near 0, but which manage a lot of money and goods, for example my big villa, my private jet and my Ferrari, how am I taxed ? And also what about the taxation on wealth (you can have a huge wealth, but only small income). – Kolaru Jan 26 at 1:00
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"the rich would have a disproportionate amount to gain from diminishing their flat rate" - I believe your entire premise is flawed. The poor are disproportionately negatively impacted by flat rate tax because there are fixed baseline costs of living that do not decrease just because you have less money. The rich would gain more absolute money by being in the the military, true, but the poor would stand to gain the most relative to their lifestyle. – Whelkaholism Jan 26 at 10:51
up vote 21 down vote accepted

Would a society where the sons and daughters of the richest all serve (if able) be significantly different from ours?

Maybe, but this wouldn't get you there. A 70% tax rate hurts poor people more than rich people. If a poor person needs \$200 a week to pay bills (housing, food, utilities, etc.) but only makes \$500 a week, then a 70% tax leaves them without enough money to buy basic subsistence (only \$150 a week).

Yes, the rich person might pay more in absolute terms, but in proportional terms, they will pay the same rate. And the thing is, that rich people have more discretionary income. That's why rich people spend their money on extra houses and private planes, because they can afford it. Someone making \$100,000 a week would still have \$30,000 a week left. Such a person remains rich even after taxes.

It's also worth noting that this is an income tax, but being rich is a function of wealth. It's quite possible for someone who is rich to have no income. They can live off their wealth and pay zero tax. A poor person does not have that option.

The real difference here is that it is much easier for low tax people to become rich. If you have two people with the same income but one has a tax of 20% while the other has a tax of 70%, one of them will find it much easier to save for the future.

If you want to incent rich people more than poor people, which is how I read your question, you should use a wealth tax rather than an income tax. Note that wealth taxes can be much lower than income taxes. The equivalent of a 70% income tax would be a 7% wealth tax. Rates like 10% or 20% are huge and would allow for large reductions, down to 2% for example (rough equivalent of a 20% income tax).

You also may want to consider offering certain exemptions per person. For example, the first \$10,000 of income or \$100,000 of wealth could be exempt from taxation. This would make service less of a necessity for the poor and more of an option, as it is for the rich.

Note: numbers given are in magnitudes reasonable for the US. Presumably there are equivalent numbers for other societies, but the US is what I know. Note that a minimum-wage, full-time job pays \$290 a week in the US (national rate; may be higher locally).

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This does not address the difference between this society and ours. – MakorDal Jan 26 at 10:42
    
I think it is an useful answer nevertheless, albeit to a slightly different question – STT LCU Jan 26 at 10:46
    
Ha ha! I should have read this before I wrote my comment above, your answer is basically what I said, but better :) – Whelkaholism Jan 26 at 11:01
    
The problem with a "wealth tax" like you put it is in what exactly to tax. For example say a hard working individual manages the American dream and builds a big company on his own, his shares are worth in the billions but as he is still trying to expand the business he doesn't pay himself much dividend/wage, still a good bit ofc but nowhere enough to pay even 1% of his "wealth". In the end making the company unable to grow as he needs to pay himself a lot just to meet the taxes and he won't create any jobs. On the other hand if shares are exempt people are gonna invest their money in shares. – Selenog Jan 26 at 11:52
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@Selenog If you want to talk about the impacts of a wealth tax, you should ask a separate question (and feel free to self-answer with your own views). In the specific circumstance that you describe, the person should sell shares to pay the wealth tax. And of course, if the business isn't producing much of a dividend, then it may not be that valuable. A wealth tax makes speculative wealth have a lower market value. Such a question might make more sense on Politics.SE or Economics.SE than here. It depends a bit on how realistic you make it. – Brythan Jan 26 at 17:29

It's clear that the government would be more wary of sending troops directly into combat, or "putting boots on the ground" where people could die. The rich are powerful. They already influence politicians (well, maybe not Bernie Sanders) through "campaign contributions" and Super PACs, giving them more money to do things that will benefit them. One thing that will benefit the rich is to have their kids come back home - alive, not in a body bag.

There will absolutely be this reluctance to send in troops, but I can guarantee you that it will only apply to certain troops. As you acknowledged, even the poor will have an incentive to serve, so it seems likely that there will be many more troops and G.I.s signing up. This means that the military will have more troops than it needs (except in times of war) and can afford to hold some back.

Guess which troops will be held back, and guess how many zeros are before the decimal point on their parents' annual paychecks.

The rich kids will get the safer jobs1 - remote surveillance, piloting UAVs from home base, gathering intelligence via satellite, etc. Chances are good that they'll have had great education, if they go to college before serving, and will be fit to do more than grunt work. So they'll get the safe jobs, while the poor suffer and die on the front lines.

What emerges from this is a segregated military, in a way. The jobs that involve no actual fighting or danger will go to the rich. They'll control remote intelligence, cyberwar, remote surveillance, and the like. They'll rise to top positions so they can command from behind, while the troops will be made of poor blokes who are literally worth nearly nothing.

The rich parents put pressure on politicians to give their kids cushy jobs, and the kids soon command the military, creating an even greater class divide, and maybe resentment towards the top of the heap in the military. Alienation between the front line troops and the generals, as well as between branches of branches of service, will lead to less unification and a less effective military.


1 No disrespect meant to the skilled men and women who carry out these jobs today. They aren't easy, and they're necessary. I'm simply looking at it from a standpoint of the likelihood of survival.

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Real life example: G. W. Bush. – Martín-Blas Pérez Pinilla Jan 26 at 7:29
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I like most of your answer, but if combat risk is also a part of the equation for determining tax rate, then that might nullify some of the inequality that your answer brings up towards the end. Someone working in a safe intelligence position would have to stay there longer than someone in a combat zone would to reach the same level of tax break. As I'm interpreting it, the system as it is in the answer already addresses the issues you bring up. Give it a few years and it could end up exactly as you mentioned, but I think the system would hold up a little better at first. Thoughts? – Jonathan Jan 26 at 14:26
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@Jonathan you can be assigned a "combat role" guarding the inner perimeter of a base deep inside conquered territory; or piloting drones from an aircraft carrier. You are not getting the bonus for extra danger, but it counts as general combat role. – Davidmh Jan 26 at 18:26
    
@Jonathan What Davidmh said. You bring up a good point, and one that I hadn't considered enough at first, but it still stands to reason that people will toe the line. There are always "combat" jobs that are much safer than others. – HDE 226868 Jan 26 at 21:17

You mention that the rich would gain disproportionately more, but in fact they would gain proportionally more. This leads to an interesting consequence of this system: your fiscal incentive to serve in the military, as a percentage of your life's earnings, is constant whether you are rich or poor. However, I would expect the rich to not just sit back idle and let the system place them into the cogworks. They would use their influence to make sure they can get the least dangerous jobs in the military and "serve their time."

If we can remove the risk to one's life from the equation by using Daddy's influence to get a safe job in the military, we can approach the role as a job. In exchange for each year of your life in service, you get a 10% reduction in taxation for the rest of your life. This is a massive payday. Massive! Let's take an example of the least beneficial year: your last year. The last year, your 8th, takes you from 30% taxation to 20% taxation. Let's say that, after your service, you enter a job which pays an average of $80,000/yr when you average it over the rest of your life, including things like promotions. If you were to work until you're 65, and we [conservatively] only consider work you'd make after age 30, you will make \$2.8 million in your lifetime. Thus, the difference between 30% taxation and 20% taxation is the difference between taking home \$1.96 million and \$2.24 million. Needless to say, when given the choice to enter the civilian workforce early and earn \$80k/yr or stay in the military and earn an effective \$280k/yr, you'll find a lot of people choosing to stay in the military all 8 years. And remember, this scales proportionally, so the rich that were looking to make \$1million/yr will effectively earn \$3.5million/yr during service.

Now the follow up question should be what sort of culture do you end up with where most of your youth spends 7 years in military service. That's a lot of bodies who need military work for them to do.

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This is spot on. Just look at WW2 Britain - the biggest risk to the soldiers of 'elite' families was a severe hangover from too much brandy from the command tent. – Scott Jan 27 at 1:04

Compare Israel, which has near-universal military service and constant low-level combat operations. The causation is the other way round: that society has universal military service because it gets involved in a lot of fighting.

Historically it's not unusual for high aristocracy and royals (UK royal family and others) to do military service. After all, it's a way of practicing for holding rank and establishing it over the lower ranks.

One thing you should watch out for is people would game the system by working out what posting had the best tax advantages for the least actual danger at any point of time. It's great being a bomb disposal expert if you can arrange to be posted to an area with no bombs.

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it's not unusual for high aristocracy and royals (UK royal family and others) to do military service but sheldom as front line soldiers, but as officials. And while they put themselves into danger, they could expect preferent treatment by the enemy (kept alive for ransom, better internment treatement) – SJuan76 Jan 26 at 8:57
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Israel has near-universal military service due to having a small population but lots of countries round it with large military that would love to wipe Israel of the map. The constant low-level combat operations does not need the size of military Israel has. Other countries have near-universal military service but use the military to build roads, fight fires etc. – Ian Ringrose Jan 26 at 14:47
    
@SJuan76 Is there any reason to believe the OP's world would be any different? – Cort Ammon Jan 27 at 1:32

(Note: I'm assuming you mean a decrease in percentage points [ie 70% -> 60% -> 50%] and not an actual percentage decrease [70% -> 63% -> 56.7%].)

I think that while there would be differences, it would ultimately end up pretty similar to today's society.

Differences: The leaders of SpartaNova would probably be a bit more cautious about declaring war. It's the simple effect of knowing that your child could be on the front lines -- but we'll get more in depth on that later. Wars would probably be carefully scoped out, planned to be combat-light and occupation-heavy (statistically you're more likely to die during combat than during occupation, so in the name of "keeping the children safe"....). Military service is the economically smart option. Due to the growing class differences (more on that in a bit), there may be resentment toward the military families.

Similarities:

Gonna start with some assumptions here. 1: People like money and people like power. 2: Those who have one, the other, or both, want to keep it. 3: Parents don't want their children to die if possible. 4: In addition to only getting full voting rights through military service, you can only fully run for office with military service.

Suppose there are two sets of people, those who have served and those who haven't. Over the course of a few decades, those who have served will end up significantly more wealthy than those who haven't (the simple effect of a 20+% reduction in taxes compounded over the years). Also, the power base will be veterans -- even if Assumption 4 is incorrect, veterans will be more likely to vote for other veterans, because of the brotherhood and all that. So we end up with one group that is both wealthy and powerful. By Assumption 2, they want to stay that way. How do they do that, especially when it's easy for someone to move into that group (all they have to do is serve for a few years and save money)?

Well, they have to find a way to make sure their kids can stay rich and powerful. That little bonus to specific roles in the military is suddenly a big deal. If they can rig things so that their kids are getting the "good" jobs, while the common riff-raff get the "bad" jobs, that will help them even more.

So we could set things up so that the wealthy families can afford specialized schools that include a focus on, for instance, military intelligence or aviation, making them more likely to get the specialized positions which lead to a better economic future for them. Alternatively, something like ROTC would be a huge draw for the wealthy families -- anything to get little Bobby a chance to get as high of a position as possible to keep him out of the line of fire. Sure, there's more risk involved in SpecOps or the Bomb Squad, but the bonus tax reduction can save a hell of a lot over a lifetime. And realistically, if they're already rich and powerful, they can probably swing it so that Bobby gets put in Intelligence, or on a submarine somewhere. Leave the Bomb Squad for the poor, think of it as a lottery to get elevated to a higher caste.

The issue with that is that it's the poorer families who are going to be on the front lines, for the most part. So going back to the earlier issue of declaring war with your kid on the front lines... Maybe not so much. The children of the rich and powerful are at less risk overall, leading to even more of a class divide - the majority of the casualties will be poor people, so enlisting is less likely to give you an advantage than going through .

There's also a high possibility of behind-the-scenes networking. "Oh, you're John Smith's kid? We've been buddies ever since Basic, I can definitely find you a place in [a "good job"]."

So all in all, it looks pretty similar to today's society, with a few minor differences, namely an even bigger class divide and the possibility of resentment toward the military.

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I imagine a society where most people join the army as soon as they leave school, remain for 5 years and then move onto their actual desired profession, which would result in a very youthful army (17-21 year olds), and a very small tax base into the future.

Presumably you get paid while you're in the army, so I wouldn't see too much of a problem with career soldiers - some of them may like it and stay on just as they do in real life.

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Would a society where the sons and daughters of the richest all serve (if able) be significantly different from ours?

Probably.
Service is not mandatory, but almost every one do some time in the army.
I also suppose that the technology level is close to ours (or above).
The question is why would a society put such high price on "staying out of trouble"
This could come from either a warrior culture or from a country that has a huge need of soldiers.

If it's a cultural thing, the loss of children will be either seen as a reason for revenge or as a proof of failure, maybe even from the whole bloodline. As it is a cultural bias, people will take the loss as they are and interpret them as they see fit.

If the main reason for this choice comes from territorial expansionist politic (Think roman empire). With modern media there will be a lot of propaganda around life loss. But the children of the powerful might be somewhat protected, with special "useless" units reserved for them. This makes for an unstable and probably repressive system as the rumors and conspiration theory might propagate out of control.

If it's a modern, western, country with dangerous neighbour/beasts, the problem has to be temporary. Our countries and ethics are not really build for sustained period of war and continuous loss of life.
This is a case where your country would be the most like ours, then turn slowly to one of the first two solutions to sustain the moral drain, either evolving it's own culture or turn to totalitarism to cope with the problem.

I forgot another possibility : You don't have much wars and conflict, so you keep a limited army. The thing is that the only one to really get the places, and the tax exemptions, are the rich kids. Of course, anyone can apply, and every one know someone who know someone whose brother has had a place. Plus you give a wide media coverage to the streets kids. But if anyone look at the real numbers, access to the military is a privilege. Though this is not exactly "spartan".

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It all depends on what life is like when taxed at 70%. If it is like some European countries, where taxes are high but you get free health care, free university, etc., then many people will be content with their position in life and there is no real incentive to join the military.

If that 70% tax doesn't get you much when it comes to government services, then you are on the wrong side of the Laffer curve, and there is no incentive for anyone to work. There is no incentive to earn any money. Not legally, anyway. If you effectively get nothing for your 70%, then it's far more of an incentive to fight the government than it is to join it. Plenty of governments have been toppled by imposing too many taxes upon the people. The government would be smart not to incentivize military service in this case, because you don't want the revolutionaries to have military training.

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This seems like a false dichotomy, Are there any other options? Admittedly, 70% tax is a bit absurd, but if it's something that people are expected to bypass with military service(from 70% to as low as 20-10%), than the average would end up being far less than the highest tax bracket. Not that the options you list are not reasonable, but I have to wonder if there is a third answer that might make long term stability feasible. – Jonathan Jan 26 at 14:31
    
@Jonathan The bottom line is that a 70% tax rate is not sustainable, unless life is so good that people will tolerate it. If life is that good, then where is the incentive to better it with a lower rate? How much better can it be? – Mohair Jan 26 at 14:42
    
70% is pretty absurd, but after adjusting for military discounts, the actual tax rate would be some number between 20% and 70% on average. Depending on what level of government support there is, a bland, but tolerable lifestyle could be the default for uninspired people, while military people and those who want to work harder can exceed the limits placed by the tax structure. – Jonathan Jan 26 at 14:46
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@Jonathan The military isn't for everyone. Some want no part of it. Some will wash out. So you can expect that a certain amount of people will never pursue that course regardless of the incentives. But still, assume most people put in two years, that still only lowers their rate to 50%, so that 50% had better bring general happiness in life, or there is going to be a large pool of disaffected people who will either set up a parallel economy that isn't subject to taxation, or will start looking to change the government. This is the kind of thing that tends to repeat often throughout history. – Mohair Jan 26 at 16:18
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some will wash out: in Heinlein's story, service was itself a right and even a highly disabled person who joins would have some job found for them that they are able to do. – JDługosz Jan 26 at 16:40

As an initial premise, a 70% effective tax rate is not particularly unreasonable. From 1936 through 1983, the effective tax rate was at (or significantly higher - approaching 90% at times) 70% for the highest incomes. If service were sufficiently dangerous or burdensome, this tax rate would likely be acceptable for many of the richest compared to the risk of injury or death.

With a minimum service period of two years, and no constraints on when an individual could enlist, the richest would likely postpone joining the military until periods of peace, and enjoy the benefits for the rest of their lives. If possible, individuals would likely enlist and serve when they are young and have low earning potential in the least dangerous and least difficult positions possible.

In all likelihood, this system would be established as a part of, or simultaneous with, the individual's higher education. If not, there would be a marginal benefit to employment figures as military service would likely serve as a massive 'jobs' program that keeps people out of the non-military workforce.

Overall, however, if you could receive the maximum benefit possible by serving five years in a safe peacetime role, I think most people would choose to serve to reduce their future tax burden. Many countries already require some sort of compulsory service for 2-4 years without massive changes in their society, so I doubt that there would be little impact across society beyond much lower tax revenue (which, notably, would greatly impact the ability of the government to support a military that consists of the majority of the 17-25 demographic).

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Cough. The top tax rate approached 90%. Not the average tax rate. In 1944, the top rate peaked at 94 percent on taxable income over $200,000 ($2.5 million in today’s dollars). calc. Once you get down to $8000 of income the tax % is only 37%, (that's about $100k today which would be taxed at 25% today). taxfoundation.org/article/… – Draco18s Jan 26 at 16:08
    
Note the term 'effective tax rate'. An individual in the highest bracket would quickly see their effective tax rate converge on that percentage. The impact of lower marginal tax rates would quickly diminish at the highest income levels. – zagdrob Jan 26 at 17:34

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