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People would still have every incentive to work to improve their lot in life; most people on HN probably have the capability to quit their jobs and live off of welfare checks, but it's not exactly a great lifestyle, even if it doesn't require any work. In fact, people might have more incentive than they do now to try out new, interesting work; knowing that if everything blows up they won't screw up their lives and the lives of their families is a great asset.
Overall, I imagine society would progress tremendously if everyone were able to get an education and do creative work while being guaranteed the basics of life, even if that results in some freeloaders surviving on the dole.
Most first rate economies already have fairly extensive welfare systems in place, and you do not see people begging to get fired from their jobs so that they can get unemployment. Most people have at least some ambition to increase their social and economic status and that won't change.
Has this ever happened? Has anyone at any wealth level ever simply stopped making money because he was upset about taxes? I hear a lot of small-time sole proprieters talk about it, but I've never heard reliable reports of it actually happening.
A quick summary is that yes, people probably do choose not to do certain kinds of work when taxes are too high, but not in the way that Bill O'Reilly tends to advertise it - it's unlikely that someone is going to quit a high-paying job because their marginal tax rate went up a point. However, if you're undertaking an endeavor with a 5% chance of success, and a 30x tax-free payout in case of success (relative to a safe option), your expected payout is 1.5x with no taxes; 1.35x with a 10% tax rate; and 0.9x with a 40% tax rate. Whether or not you'd take the risk in the first two cases varies from person to person, but in the latter scenario, most people wouldn't bother; you'd have better expectancy at a roulette table.
Still a bit different from the classic "going galt," though.
Yes, it happened to Ronald Reagan. When the top tax rate was 90% (he was an actor at the time), he chose to make only two movies/year. He saw little point in making more movies since he wouldn't get paid for it.
http://toomuchonline.org/the-tax-that-turned-ronald-reagan-r...
Meanwhile, a true artist, would make movies no matter what the top tax rate was, because he had the urge to. Artists have worked for nothing for ages, in order to create.
Those who are self-motiviated, and those who aren't. Or rather, there's a continuum. Most people aren't that self-motivated so they mostly do nothing.
Those who are, will continue to contribute to society regardless if they got paid or not.
A society can have totally different ways of compensating someone.
