A reverse progressive tax system?

Presently in Australia, like many other countries, we have a ‘progressive’ tax system, where higher earners pay higher marginal tax rates. This kind of system is almost universal, and has been adopted on the basis of ‘fairness’, i.e. the age old social-democrat/socialist ideology that people should “pay according to how much they can, and receive according to how much they need”. The trouble with this kind of system is that it stifles incentive. The more successfull you become, the more inhibition there is to succeed more. To remedy this, many Conservatives and Libertarians, including myself, have strongly advocated a flat-tax. That is, a single income tax rate that is the same for everybody, independent of how much they earn. While I strongly support this kind of system I’m tempted to ask the question “why not go one step further and introduce a reverse progressive tax system?”. Specifically, one would have a cascaded tax system, but the highest marginal rates would kick in for the first dollar you earn, and then every dollar after that the tax rate becomes progressively less. This might seem a little radical, and probably it is. But it’s worth considering the merits of such a system. A tax system structured like this would massively add to the incentive to develop and earn more, and to seek promotion and bonuses. And the incentive would increase with every extra dollar that people earn. I realize that this idea is completely, 100% politically unviable, but I think it’s an interesting idea nonetheless.

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