This is probably the argument offered against high taxation that I hear the most:
it reduces incentives to work harder, hence ultimately hurts the economy.
What is the justification for this? I'm sure it's true since that's what everybody says, but it doesn't seem clear to me at all.
The only explanation I've been able to find online is that when people are rewarded less for their work, they work with less vigour and less creativity. But why is that necessarily true? If I'm making, say, 1000 dollars a week after taxes and suddenly, due to a shift in the tax rates, I overnight start making 800 dollars a week after taxes ... why would that induce me to work less? Shouldn't I be working the same as before? Because if I don't, I'd be making less than 800 dollars per week? In fact, if I can only meet my budget with 1000 dollars a week, then wouldn't I be induced to work more so that I could make up that deficit of 200 dollars and get back to my desired income level?
In fact, in economic theory, there's the notion of decreasing marginal utility, i.e. that the more we earn, the less we care for it. So if you earn 10.000 dollars, and I give you another 5000 dollars, that'll be massive for you. But if you earn 10 million dollars, and I give you another 5000 dollars, you probably wouldn't even notice it. So by that logic, shouldn't higher tax rates lead to people working harder, since they now earn less than before and therefore value each extra dollar more than they did before?
I'm looking for both statistical or intuitive answers to clear my misconceptions.
EDIT: I should say, I am specifically interested in why higher tax rates reduce incentives to work. Whether or not higher tax rates are ultimately bad for the economy (e.g. through reduced consumption and investment) is not what I'm asking for.
EDIT2: I found another argument, which I also find don't find completely obvious. So the argument goes that if you were asked to work 1 extra hour, you might be more likely to do so if taxes were low. However, I would again make the argument that if taxes are low, you are already making more money than before. So when your boss comes to you and asks if you want to work 1 extra hour, you might say 'yeah, sure, taxes are low so there's good money in it', but might you not also say 'no, thank you, taxes are low so my current income is quite satisfactory and I'd rather go enjoy spending it than work harder'?