Not quite the same, but here's some median income broken down by family type.
http://img69.imageshack.us/img69/6283/reagan2.jpg
Yeah, it's not the same. But it makes my point. A great deal of the growth in the median income is the drive to put wives to work. Women's earning power shot up, and then their working while being married raised the median as their contribution dominated the signal.
The trend towards two-income families peaked ... iirc ... in the early nineties. So, the benefit from adding an additional income was no longer available to raise the median. I'm not denying that earning power has risen, by the way. I'm rather sure it has. As well, since I'm happy to count externalities, I recognise that the median wealth has risen a lot more than a lot of people have!
But 1/3 of households adding a second earner had
better raise median family income, or there's something seriously wrong!
At some point, the rich completely stop caring about what those dollars can buy and only care that they have more than someone else? That's an odd assertion.
Haha. No, that's not what I meant. Sorry. I'll rephrase. There is
always incentive to build wealth, even if the net rate-of-return changes. Wealthy people will be driven to get a rate-of-return on their time & investments, because they want to be wealthier. Beyond a specific cognitive point, people no longer earn in order to generate personal utility. They earn in order to increase their relative wealth status.
More importantly, though, you seem to think that if taxation is just on profits, then all is good; it won't crowd out investment. That is, a tax increase will just let me keep less of my profit, but I'll still be in the black. This doesn't stand up to scrutiny, however. Profits aren't like wages; they often come as the reward for long-term capital investments. The risk (and sunk resources) here can only be offset with a sufficiently high profit. Accordingly, cutting into profit further will crowd out investments on the margin.
Yes, it will crowd out specific investments, much like a higher borrowing cost does. And yes, we can ostensibly lose out on that front. But the real question is whether the effect comes out in the wash. A tax on profits essentially drops the ROR on an investment. However, a drop on ROR doesn't reduce the total drive to invest. People will still go and invest capital where they think there will be a return. The opportunity to pool capital will still be available, and it will still be aggressively pursued.
But, yeah, taxing profits obviously affects ROR.
If (ha!) it's fairly applied, it's a similar effect for all entrepreneurs. Their individual motivation to pursue opportunities will remain. And, because part of the taxation is simply redistributive, the potential ROR
for their money (because we mostly measure income in money, cognitively) will be higher based on the fact that they have more customers.
So, yeah. On the one hand, we have a decrease in investment in riskier ventures (thus creating a slower growth rate, ostensibly) and deadweight loss. On the other hand, we have the creation of public goods and any social benefits due to redistribution.
It's a question of balance. Some people overvalue social benefit. Others ignore public goods. We talked about how taxes decrease risky ventures. But public goods create products that would be sorely under-invested in without people spending to benefit the
civilization instead of the capital-holders.
.
, in reality it appears to make very little difference to be honest. Europe on the whole has much higher taxes than America and yet does basically just as well economically. 
There's a pretty good explanation for most of that trend!
