Tax Bubbles
This
phrase
refers to a situation where some levels of income have the highest rate
of taxation, even though the rate for the highest income earner is
lower than the rate for an upper-middle class earner. This can happen
with AMT.
Another
definition is when a country has excessively high tax rates the country
may
find it needs to do drastic tax cuts to stimulate their
economy, so the rate of taxation plunges from an unsustainable high, or
bubble. For example, the U.S. had a
93% rate of taxation for the top earners which was reduced in the
1970's
and 1980's.
Another
definition is when a state like California has a huge amount of income
coming from the top earners during boom times and then this taxable
income is drastically reduced during a crash that in turn causes a "tax
crash" as the result of taxpayers falling into lower tax brackets
during an
economic crash.
Mayflower Capital
Donald
Martin, CFP®
1000 Fremont Ave.
Ste.
135
Los
Altos,
CA 94024
(650) 949-0775
Don@mayflowercapital.com
Donald
Martin is a Napfa-Registered
Fee-Only financial planner and investment advisor.
